Wall Street Beat: Google stirs market optimism

IDG News Service - Google's surprisingly strong earnings helped spark renewed confidence in the tech sector in advance of a raft of vendor earnings announcements next week, as shares of bellwether IT companies led markets upward Friday.

Concerns about U.S. unemployment, the political impasse over the federal deficit, and sovereign debt in a number of European countries have overshadowed corporate earnings in the past few months. Even though bellwether tech companies have made impressive sales gains this year, their shares have been battered on the markets as economic worries have caused analysts and shareholders to question IT spending trends.

After the market closed Thursday, Google said that for the second quarter, revenue grew 32 percent year on year to US$9.03 billion. Excluding fees and commissions, net revenue was $6.92 billion, exceeding the $6.55 billion consensus forecast from analysts polled by Thomson Financial. Google's profit was $2.51 billion, up from $1.84 billion a year earlier.

Analysts have wondered whether Google could maintain its growth as it expands and faces mounting costs trying to branch out from its core strength in search ad sales. The results seemed to assuage fears for the moment.

"We believe the accelerating growth, particularly in the Google sites segment, and the rising net revenue per employee, even in the face of accelerated hiring, are clear indicators of the company's trajectory, and ultimately, the stock," said Canaccord Genuity analyst Heath Terry in a research note.

Google's strong report seemed to put the focus back on earnings, right before a week in which some of the biggest names in tech, including Apple, Yahoo, IBM, Microsoft, AT&T, Nokia, EMC, Intel and AMD are due to report their own results.

Shares of many of those companies climbed Friday as the tech-heavy Nasdaq closed up by 27.13 points at 2,789.80. The Dow Industrials closed up by 42.61, to 12,479.73, and the S&P 500 closed up by 7.27 to 1,316.14.

After getting battered by economic worries in May and for most of June, computer stocks fell below the year's opening levels. Although an end-of-the-quarter rally helped get July off to a strong start, the markets have nevertheless been on a roller-coaster ride.

But with this week's surge, helped along by Google, computer stocks on the Nasdaq are now up by more than 2 percent for the year. The tech/media/telecom sector of the New York Stock Exchange is also up by about 2 percent for the year.

On Friday, IT bellwethers led the market up. Microsoft closed up by $0.31 to $26.78; IBM closed up by $1.31 to $175.54; Amazon was up $2.49 to $212.87; and Google was up $68.68 to $597.62. Even some of the chip and hardware stocks rose: Intel gained $0.10 to hit $22.37 and Dell rose $0.28 to $16.97.