“Apparently, investors decided to take their profits so they sold their tech stocks recently on fourth-quarter 2009 earnings news,” said Ed Yardeni, president of Yardeni Research, in an early February report to clients. “I think they will quickly regret doing so and will jump back into the sector with both feet.”
Burton goes on to say, “The tech sector is highly sensitive to the economy, and its stocks can surprise to the upside when business customers replace outmoded inventory. That has been true of this latest earnings season, with corporate-spending bellwethers Cisco Systems and Hewlett-Packard posting better-than-expected year-over-year results. They have stated that sales look promising. H-P’s sales are benefiting in part from the favorable launch of Microsoft’s Windows 7 operating system. John Chambers, Cisco’s chief executive, told analysts on the company’s Feb. 3 earnings call that the company is seeing “very strong” recovery in its markets and plans to hire up to 3,000 employees over the next few quarters.”
“Tech is by far outpacing all the other sectors in terms of earnings growth,” said Brian Belski, chief investment strategist at Oppenheimer Asset Management, who rates technology his top sector. “Technology will be an earnings-growth driver for the next several quarters.”
“An old Wall Street adage says that when earnings growth is scarce, as it is now, growth outperforms. Moreover, expected higher interest rates would suggest a stronger, growth-driven economy, which would be a plus for technology firms. In addition, cyclical sectors such as tech typically lead in the second year of a bull market, which is on track for the beginning of March,” Burton Reports.
“Growth is not universal, and therefore the market is going to pay a premium for it,” said Jim Awad, managing director at Zephyr Management in New York.
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Here are some details on the Technology Select Sector SPDR ETF (XLK):
The investment (XLK) seeks to correspond generally to the performance, before fees and expenses, of publicly traded equities of companies in the technology economic sector. The fund typically invests at least 95% of assets in companies of the technology sector. The fund’s sector includes companies from the following industries: Internet and IT services, software, computers, peripherals, electronics, semiconductor equipment, and a variety of telecommunication products. It is nondiversified.
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