Wall Street beat: Tech fails to lead markets

Economic news lifts markets, but IT companies still trail other sectors

Good macroeconomic news on jobs, trade and European sovereign debt is helping to buoy the markets this week in the unofficial post-Labor Day start of the fall trading season, but tech stocks are still down for the year.

IT market watchers may be worried that earlier optimism about growth in tech spending was overinflated.

A new survey issued by Gartner Executive Programs on Wednesday showed that CIOs expect IT spending to grow only 1.1 per cent in 2010. Though that's a slight increase, it comes after a whopping decline of 8.1 per cent in 2009.

"Economic conditions are changing CIO spending priorities as the need to upgrade infrastructure is being appropriated from reduced operating budgets," said Mark McDonald, group vice president and head of research at Gartner Executive Programs, in the report. The survey polled 500 CIOs globally.

Larger IT organizations, often seen as leaders when it comes to setting new technology trends, are not necessarily increasing the budgets assigned to IT, but rather swapping one set of budget items for another, McDonald said.

"Size certainly matters in terms of IT budget outlook," McDonald said. "Smaller firms report significantly stronger IT budget growth percentages than their larger counterparts. The larger the firm, the tighter it is managing its IT budget in general and IT operating expense in particular."

Meanwhile, a separate Gartner report this week on semiconductors said that while chip inventory levels are down, the trend may be misleading. Low inventory levels are usually seen as a good sign, as users are assumed to be snapping up products. But danger may lie ahead, according to Gartner.

"The semiconductor supply chain is lean because the industry is producing close to capacity," the report said. "The danger lurking under the surface is a potential overbuild of semiconductors and electronics in the face of a slowing macroeconomy and continued weak consumer confidence going into the holiday season."

General uncertainty also affected the view of proposals floated Wednesday by U.S. President Barack Obama, which had a mixed reception among IT insiders.

Obama's plan to call on Congress to approve a permanent research and development tax credit for U.S. companies was met with general approval by tech leaders.

"The R&D credit is one of the strongest tools our nation has to spur the cutting-edge innovation that will drive the creation of more American jobs," said Rey Ramsey, president and CEO of TechNet, a lobbying group representing tech CEOs, in e-mail.

But proposals by Obama to allow businesses to write off all of the investment they do in 2011 may cause some companies to put off IT spending, according to some industry insiders.

Technology companies helped lead markets out of the recession, but as fears of a double-dip recession started to take hold during the first half of the year, IT has not fared as well as other sectors in the markets. A spate of strong earnings reports in July and early August from bellwethers including IBM, Microsoft, Google and Intel caused a brief rally in tech stocks, after which the doldrums once again took hold.

The big picture brightened somewhat this week. Exchanges were generally up Wednesday as market watchers reflected on a successful Portugal bond auction that helped alleviate fears about the sovereign debt crisis. Growing national debt in Greece, Spain and Portugal has raised fears of large-scale defaults on debt obligations, so any sign of confidence in those countries acts as a tonic for markets these days.

In the U.S., Thursday brought some good news as the Census Bureau and the Bureau of Economic Analysis of the Department of Commerce announced that total July exports of $US153.3 billion and imports of $196.1 billion resulted in a goods and services deficit of $42.8 billion -- better than the $49.8 billion gap in June. The Department of Labor, meanwhile, said for the week ending 4 September, seasonally adjusted initial claims was 451,000, a decrease of 27,000 from the previous week's revised figure of 478,000.

Despite the good news, on the tech-heavy Nasdaq exchange, computer stocks are still down by 4.15 per cent for the year, while telecom stocks are down 7.22 per cent. Nasdaq industrial stocks, however, are up by 3.55 per cent, and the broad Dow Composite index is up by 1.76 percent.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags Gartnerbusiness issuesfinancial resultspersonneltechnetMergers / acquisitions

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Marc Ferranti

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?