NEW YORK (CNN/Money) - Tech investors are a bit like Red Sox fans. They've seen more false dawns than they'd care to count, but every once in a while something will happen to make them secretly hope the long drought is finally over, that maybe they'll finally be given some reason to celebrate.
Now is one of those times -- but by opening day tech investors may find their cheer has faded.
|Sector ||2003 performance |
|Information Technology ||+2.8% |
|Energy ||-1.3% |
|Health Care ||-2.7% |
|Financials ||-4.2% |
|Consumer Discretionary ||-4.2% |
|Consumer Staples ||-5% |
|Industrials ||-5.6% |
|Materials ||-6.1% |
|Utiliities ||-7.4% |
|Telecommunications Services ||-14% |
| Source: Standard & Poor's|
In a hard year for stocks, tech shares have shone. Where the Dow Jones industrial average and the S&P 500 are well below where they finished 2002; the Nasdaq is near its flat line. Of the ten S&P sector indexes, only the Information Technology, up 2.8 percent, has gained on the year.
That divergence is a break from the trend of the last few years, when tech stocks basically acted like the rest of the market on steroids. The market would fall, and tech would drop even more. The market would stage a recovery rally and tech would hop a little more.
"There seems to be some stabilization," said Weeden strategist Steve Goldman. "Stocks that were collapsing just aren't acting that way anymore."
But many market watchers question whether there is any fundamental reason for tech's better performance lately. The fortunes of tech companies are closely tied to the economy, specifically to other companies' willingness to spend on new capital equipment.
Earlier this month Cisco Systems said that sales in its current quarter would be lower than the previous one; analysts had expected growth. Chip equipment maker Applied Materials had a huge fourth quarter earnings miss. Early Monday, an Oracle executive made comments that the market took to suggest the company saw sales this quarter at the lower end of guidance.
"It's hard for me to get excited about a cyclical recovery when I personally think that the risks of a double-dip recession are increasing," said Merrill Lynch equity strategist Rich Bernstein, who has long recommended clients to underweight technology. "If anything, the fact that tech is outperforming underscores my notion that the U.S. market is still highly speculative."
Bernstein isn't alone in his sense that what's going on in tech stocks is more about gamesmanship than anything fundamental. "When in doubt, blame the hedge funds" is a good mantra for when you're trying to figure out market movements you can't understand.
"We have a professional market going on right now," said Richard Dickson, technical analyst at Lowry Reports. "The individual has just abandoned it and you've got traders jerking it around. If you're playing in the market, what's your best way to make quick gains? Pick the higher volatility stocks. What are those? Tech stocks."
Curse of the Bambino?
Still, there's something strange going on with tech stocks, and it's hard to hang it all on short-term types playing in the market's currents. Every day we hear about how investors are plagued by uncertainty, and yet investors for some reason have been buying the market's most uncertain sector. And, Weeden's Goldman points out, when techs have turned lower this year, the trading volume has been on the light side. For whatever reason, the rush to sell tech isn't there like before.
"There are some subtle signs of change," said Goldman. "People should pay attention to them."
Thursday night the Boston Red Sox will kick off their spring training season with a game against the Minnesota Twins at City of Palms Park in beautiful Ft. Myers, Fla. The Sox don't look strong this year, but, just like every spring, their fans are harboring the irrational hope that this will be the year.