Tech Results Spur Rally, but More Earnings Await
Google and Microsoft could combine to keep the tech rally going Friday.
Both companies were trading higher in the after-hours session Thursday, after releasing earnings that contained positive surprises.
General Electric, a bellwether for the global economy, is the big report to watch Friday morning.
General Electric, a minority owner of CNBC, is expected to earn $0.37 per share, on revenues of $36.8 billion.
There is a dearth of economic news and few other earnings Friday, aside from Schlumberger, Baker Hughes, SunTrust, Ingersoll-Rand, Xerox, Manpower, Vodafone and Cemex.
“I think tech stocks will do better on the back of Microsoft and Google,” said Steve Massocca of Wedbush Securities.
Tech stocks were the best performers Thursday, driving the Nasdaq up 23 to 2965. The Dow was up 34 points at 12,943, and the S&P was up 3 points, at 1376, just above the key resistance level of 1375.
Wednesday’s good earnings reports from IBM, eBay and Qualcomm helped get the tech rally going, even as Thursdays’ economic reports on housing, jobless claims and the Philadelphia Fed survey were all weak.
Microsoft had a huge, expected one-time charge of $6.2 billion from an internet business, but it managed to beat the bottom line expectations of most analysts. However, it missed on revenues, and even so it rallied about 2.5 percent.
Google was a surprise, with second quarter net income of $2.79 billion, or $8.42 per share. But its revenues of $12.2 billion were also a surprise. Its recently acquired Motorola Mobility added to the top line, but revenues from its existing internet business also grew — to $10.96 billion, from $9 billion a year ago.
“You’re seeing a lot of good profitability on the part of companies, when everybody was saying how many more efficiencies can these companies find,” Massocca said. He also said companies continue to under promise, and therefore are able to beat expectations.
“I think stocks are just not that expensive right now. I think the market’s been depressed. We’re not up a lot on the year. There’s not a whole lot of other places to put money. Everything of a fixed income stripe is beginning to look expensive,” he said.
Massocca said tech is the “cleanest dirty shirt,” able to show growth even in the sluggish economic environment.