Wall Street Beat: Market rally, tablet excitement lifts IT

IDG News Service - Tech stocks rose along with major indexes this week as central banks came up with a plan to ease market fears about European sovereign debt, and as key IT players including Microsoft, Intel, and Cisco held conferences for developers, users and analysts.

Tech stocks have been depressed through most of the third quarter, weighed down by fear that a sputtering recovery would short-circuit IT spending. The possibility that one or more countries in Europe would default on debt obligations, disrupting the financial sector throughout the world, compounded those concerns.

"The odds of a double-dip U.S. recession continue to rise and are raising fear that sales prospects will deteriorate further," said Bryan Lewis, research vice president at Gartner in a report on the semiconductor market this week. "Gartner is closely monitoring IT and consumer sales trends for any significant signs of weakness."

In a separate report, IDC noted that PC sales have been tepid. PC sales rose just 2.7% in the second quarter of 2011 from the year-earlier period, compared to a forecast of 2.9% growth. For the full year, IDC expects worldwide PC shipments to increase by just 2.8%, a downward revision from the previous forecast of 4.2%.

"In these tight economic times, and with new and competing products for consumers and businesses to spend money on, PC growth will remain slow in the next couple quarter," said Loren Loverde, vice president of IDC's Worldwide Consumer Trackers.

This week, however, a consensus among central banks on how to deal with the sovereign debt crisis emerged, calming fears of market watchers. On Thursday the U.S. Federal Reserve along with the European Central Bank and three other central banks agreed to supply loans to financial institutions with exposure to Greek debt.

The news sparked a market rally, lifting shares of IT companies. Computer companies on the Nasdaq closed Thursday flat for the year. Just Wednesday, Nasdaq computer stocks were down 1.67% for the year, and earlier in the quarter they had been down about 5% for the year.

The rally continued Friday morning, with Nasdaq computer stocks up 9.24% for the day by midday.

Conferences held this week by major IT vendors also played a part in boosting confidence.

For example, Cisco on Tuesday presented a plan to focus on core businesses and streamline management, about a month after reporting that profit dropped by a third, year over year, in its latest fiscal quarter. CEO John Chambers also put to rest rumors that he would be stepping down.

The company has cut its long-held view that it could generate 12% to 17% annual sales increases, adjusting expectations to 7% to 8%. Nevertheless, the management shakeup and new focus appears to have assuaged investors.