NEW YORK (CNN/Money) -
What's up with all these shiny, happy tech companies lately?
Cisco CEO John Chambers and EMC CEO Joseph Tucci both told audiences at an SG Cowen conference in Boston this week that they were seeing gradual signs of a corporate tech spending pickup. Also at that conference, Hewlett-Packard CFO Bob Wayman reaffirmed the company's fiscal fourth-quarter outlook.
In addition, there was a tech trifecta of good earnings news Thursday: Intel tightened its sales guidance, National Semiconductor said sales for its fiscal second quarter should be higher than expected, and PeopleSoft raised its earnings and revenue targets for 2004.
Not a bad week.
| Good week for tech
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And in what might be the most encouraging sign, tech stocks have continued to rally despite some negative news for the overall market, such as the announcement of a probe of the mutual fund industry by New York State Attorney General Eliot Spitzer.
Not even Friday's disappointing jobs report was able to push the sector back. The Amex Technology Index was up about 0.5 percent Friday afternoon while the Philadelphia Semiconductor Index gained more than 2 percent.
"There's a saying that a market that doesn't go down on bad news is destined to go up," said Carl Marker, manager of the IMS Capital Value fund, which owns shares of tech companies EMC, Symantec, Unisys, LSI Logic and Sungard Data Systems.
So does tech rally still have a ways to go? That might be a stretch. But at the very least, it seems to be getting less and less likely that tech stocks will experience a major pullback in the near term.
Wendell Perkins, manager of the JohnsonFamily Large Cap Value and JohnsonFamily Small Cap Value fund said that tech stocks might trade sideways for a while as investors digest this year's massive run. But he is not worried about fundamentals taking a turn for the worse.
"We are seeing a real recovery in tech revenue and earnings, and we look at 2004 being a reasonably good year for the economy. The question is: Does the outlook really support the market run and the valuations we put on those companies?" Perkins said.
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| | | | Insider Selling (mill) | | Insider Buying (mill) | | June | $427.0 | $2.8 | | July | $515.9 | $3.6 | | August | $909.1 | $5.9 |
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| | | Source: Thomson Financial |
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One other factor that could limit upside in the short run is the fact that tech insiders don't appear to be showing much faith in the rally, despite all the good news on the earnings front lately.
The level of insider selling in the tech sector hit $901 million in August, the highest level since November 2001 according to Thomson Financial. The value of tech insider buying totaled only $5.9 million in August, which means that for every $1 in insider purchases, there was nearly $154 in insider sales.
Lon Gerber, director of insider research for Thomson Financial, said this is the most bearish indication of insider sentiment in tech since Thomson started tracking insider transactions by sector in 1997.
What's more, August marked the third consecutive month of less than $10 million in insider purchases in the tech sector. So even though tech execs are talking a good game about an improving environment, their actions aren't backing that up just yet.
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