No stampede yet to snap up tech stocks

Jan 10, 2006

Stocks are back on a roll once again, and the bulls are out in full force to tout their optimism about the U.S. financial market's outlook. The renewed optimism about share prices is felt perhaps nowhere as keenly as in the technology sector, which has never fully recovered from the blows of the dot-com bust that hit markets in the spring of 2001.

Yet even as the benchmark Dow Jones industrial average rose to the level it had not seen in nearly five years Monday, not many industry analysts are expecting a return to the tech stock heydays of 1999, at least any time soon.

To be sure, there appears at first blush to be far greater confidence now not only in the U.S. economic outlook, but in global growth prospects, as the Dow reached 11,000 for the first time since June 2001, and its highest level after the Sept. 11 terrorist attacks that year. The tech-heavy Nasdaq, meanwhile, climbed up to 2,318.69, as the dollar continued to gain strength against major currencies.

So while the Dow may be facing some profit-taking, many analysts are broadly upbeat about the index holding on to its gains, at least in the medium-term.

"The market generally has the feel that it likes this 11,000 level," said Ian Jenkins, head of financial spreads at Cantor Index, adding that "there don't seem to be any icebergs ahead."

That may well be, but in the overall ebullient market, some of the biggest names in technology saw their share prices fall, including online retailer Amazon.com, which fell 79 cents to $47.08, while IBM lost $1.22 to close at $83.73. Granted, part of the reason for the two companies' dip was due to analysts' reports from investment bank J.P. Morgan, which lowered its assessment of IBM to neutral from hold, while it predicted Amazon's growth prospect to lag behind that of the broader online retailing market in the United States.

In addition, there are longer-term risks that could bog down equities in general, including the possibility of a decline in the real estate market and the potential for the Federal Reserve to continue raising interest rates even as analysts expect the central bank to conclude its tightening cycle within the next few months. Furthermore, while global economies appear to have withstood the continued rise in energy costs, there is the possibility that prices could climb further and put additional pressure on manufacturers in particular.

Such negative potentials could certainly weigh down the technology industry, which has benefited from the improved market sentiment as both businesses and individuals are prepared to invest more in information technology equipment, in addition to snapping up consumer electronics.

As a result, overseas investors were largely unaffected by Wall Street's gains, as Tokyo's benchmark Nikkei-225 index tumbled 1.85 percent, or 303.86 points, to close at 16,124.35, while European bourses ended largely lower, with London's FTSE index losing 0.65 percent to end at 5,694.50 while the German DAX 30 dropped 0.69 percent to 5,499.04.

Nevertheless, there is no doubt that stocks in both Europe and Japan have been following the U.S. trend of rising broadly higher amid heightened optimism about prospects for 2006, especially as the Tokyo bourse rose to its highest level in four years last week. Still, cautious optimism prevails, and few expect a rush to buy up tech stocks despite improved market sentiment.

Copyright 2006 by United Press International

Explore further: Dutch chipmaker NXP to buy Freescale Semiconductor for $12B

add to favorites email to friend print save as pdf

Related Stories

How can Google snap its stock out of its stupor?

Jan 30, 2015

Google has turned into a stock market laggard as the shift to mobile devices has lowered the Internet search leader's digital ad prices and the company's expensive investments in far-out technology has trimmed ...

Health checks will be seated by Sharp

Dec 08, 2014

(Phys.org) —Sharp unveiled a news-making prototype of a sensor earlier this month at Semicon Japan 2014, which took place from Dec 3 to 5. As its title suggests, Sharp's "Blood Vessel Aging Degree Sensor" ...

Recommended for you

High-precision radar for the steel industry

20 minutes ago

Steel is the most important material in vehicle and machinery construction. Large quantities of offcuts and scraps are left over from rolling and milling crude steel into strip steel. New radar from Fraunhofer ...

'Slow motion at the speed of light'

50 minutes ago

New technology developed by a collaboration between the UA and the University of California, Los Angeles, provides real-time monitoring of streaming video to optimize network traffic.

Virtual vehicle testing – modeling tires realistically

50 minutes ago

Manufacturers conduct virtual tests on vehicle designs long before the first car rolls off the assembly line. Simulation of the tires has remained a challenge, however. The software tool "CDTire/3D" from ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.