While others are waiting to see if the S&P 500 will fall into official "correction" territory (10 percent drop from highs) this week on continued fears of a Greece default and more hints of higher interest rates around the world, there’s a sector where one doesn’t have to wait any longer: technology.
The Technology Select SPDR sector is already down 11 percent from its intraday high reached on January 5th until its intraday low reached on Feb. 5. But now the sector is starting to catch a bid before two of its key members report earnings this week: Hewlett-Packard and Dell.
“We are somewhat surprised that investors cite potential volatility in the global economy and the recent strength of the US dollar as reasons not to add exposure to technology,” wrote Brian Belski, chief investment strategist at Oppenheimer, in a note to clients today. “Yes, the sector relies on the international economy for a significant amount of revenue. However, in addition to its improved fundamental condition, we believe the sector benefits from encouraging macro trends exhibited in unfilled orders, pricing power, computer inventories and retail sales for computers and software.”
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Belski, once a widely-followed strategist at Merrill Lynch and Piper Jaffrey before moving onto Oppenheimer, makes technology his top sector pick in the S&P 500.
After being the best performing sector in the S&P 500, investors sold technology shares to raise cash, instead of because of the fundamentals, according to Joe Terranova, Virtus Investment Partners Chief Market Strategist.
Terranova, also a Fast Money Trader, looks correct when you look at the earnings forecasts given in the last month by the group. More than a fifth of all technology companies that reported 4th quarter earnings also raised their earnings guidance, according to Bespoke Investment Group. Far better than the second-place sector: Health Care, where 12 percent of its sector members raised forecasts.
Terranova added to his positions in Dell, which reports earnings Thursday, Google, Apple, EMC and Microsoft on Friday. Hewlett-Packard, which reports results Tuesday, was initiated ‘buy’ at the firm Collins Stewart this morning.
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