NEW YORK (CNN/Money) -
Maybe there's something to this tech rally after all.
Sure, I've been pooh-poohing the move in tech stocks. Call it the Eeyore syndrome. But when stocks continually go up on bad news (or not very good news), it is worth investigating further. Look at what happened with chip stocks on Monday, for example.
The Semiconductor Industry Association said that chips sales in the first quarter of this year were down 3.2 percent from the fourth quarter of last year. As a result, the trade group lowered its full year 2003 growth forecast from a 19 percent sales increase to an increase of 10 percent to 15 percent.
Not awful news, to be sure. But not exactly a report that makes you want to kick off your heels and dance. Still, that's exactly what investors did, figuratively speaking at least.
The Philadelphia Semiconductor Index, a benchmark for chip stocks known as the SOX, surged 2.5 percent on Monday. And on Tuesday morning, the SOX was up another 1.8 percent. For the year, the index is up 17 percent.
Where's the spending?
I'm not buying it. The $64,000 question hasn't changed: When will businesses start spending on tech again?
Think I'm too much of a sourpuss or is my gloominess justified? E-mail me at paul.lamonica@turner.com
With a third of the year nearly done, there does not seem to be any clear evidence of a major recovery in spending even though there is a lot of buzz lately about how businesses are going to need to go on a mad shopping spree to replace all the "old" equipment they splurged on at the end of 1999.
Other than the SIA report -- which is always way too optimistic -- the most optimistic forecast I've seen is from a March poll in CIO Magazine. Respondents said IT spending would increase 6 percent over the next 12 months.
From there it gets worse. According to a survey this week from Soundview Technology Group and Gartner, a group of 164 tech professionals said that they expected IT spending to fall 1.7 percent this year. That's down from a forecast of flat spending in November.
A February survey from Goldman Sachs forecast just 1 percent growth, down from expectations of a 2 to 3 percent increase late last year. And a recent prediction from International Data Corp was for 2.3 percent growth, down from 3.7 percent.
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In other words, the people who actually make the spending decisions don't know when they are going to start stocking up on more servers, routers and enterprise software.
But Wall Street has made up its mind. The S&P Tech Index is up 8.7 percent this year and 38.4 percent since the market's early October lows.
Now don't get me wrong. I wouldn't go shorting Microsoft, Cisco or the QQQ. In fact, tech has probably hit a bottom.
But if spending is basically flat this year, I think it's tough to justify much more upside for tech stocks in the next few months.
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