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Thursday, February 21, 2008

HP stands nearly alone

In an update to yesterday's post about Hewlett Packard's (HPQ) excellent performance not necessarily being an indicator that the entire tech sector would do well, I wanted to comment on yesterday's market action.

In a day marked with bad news on the financial, housing and inflation fronts, the technology sector managed to rally 1.7%, largely due to HP. Was this positive attitude warranted?

As an anecdotal survey of the state of tech yesterday, one can always use as a proxy the posts on the Tech Trader Daily blog at Barron's. Here is what yesterday looked like on one of the best tech blogs:

The following stocks reported poor earnings, weak guidance or both: Tekelec, Novatel, Verigy, MEMC, Analog Devices, DealerTrack, Veraz, Garmin, Limelight, ComCast, Verizon, AT&T, Qwest, Sprint, Sharper Image, 3Com

The following companies provided good earnings, good guidance or both: Local.com, Synopsys, BIDZ

That's 16 companies on the negative side and 3 companies on the positive side. Pretty lopsided. HP, having reported the previous day after the close, was not included in yesterday's posts.

To support a sustained rally in tech, one would expect to see more good news coming from a wider variety of tech companies and especially from some of the smaller players. This mini-survey does not indicate that we are there yet. I get the impression that yesterday's rally in tech may have been more about being over-sold or about short-covering rather than being about the bright prospects of the overall tech sector.

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