Will technology skirt the U.S. recession, instead of causing it, as it did in 2001? The activity in today’s market suggests investors remain bullish on tech at the expense of most other sectors, particularly large-cap technology names. Among those leading the way today were Apple Inc., which gained 3.8% in trading headed into its Wednesday earnings release, and Research in Motion and Microsoft Corp. were boosted by heavy buying as well. “People just saw RIMM and Google earnings, and they figure Apple is going to be a blowout too,” says Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams, who says investors may have believed tech would suffer along with the rest of the economy, but “that was until RIMM and Google came out.” Still, Tobias Levkovich, head of investment strategy at Citigroup, says capital expenditures in the technology sector are also likely to slow, saying that “history argues that credit constraints will affect all forms of capital investment…while some very specific areas may be more insulated than others, it seems highly unlikely that capex trends will be positive in the next six months or more.”
Google Inc. is rightfully known as one of the boom stocks, putting together massive gains through most of 2006 and 2007 before stumbling late last year and through most of this year. But the chart of CME Group Inc. isn’t all that much different. For the past two years, Google stands as the outperformer, gaining 23% to CME’s 0.7%, but a three-year chart puts CME in the lead with a gain of 196% vs. Google’s 164%. The Internet giant last week reported strong earnings for the first quarter, but the stock is still a laggard in 2008, falling 22%. CME Group is in a similar position, having fallen 24% on the year headed into Tuesday’s earnings release.
