Trader Talk: Trouble for Techs, Commodities

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

Stocks are up modestly in the last trading day of the month. But don’t kid yourself — it has been a down start to the year for the markets. Stocks are down 2.5 percent in January and are looking to have their worst month since last February, thanks in large part to China tightening worries and concerns over government reforms for big U.S. banks.

Despite the turbulent start to the year, the markets are hoping to finish the month off on a positive note following some good economic data today. Stock futures got a 5-point boost immediately following the stronger-than-expected GDP growth (up 5.7 percent vs. expected growth of 4.7 percent), which grew at its fastest pace since 2003.

Two trends have been very much in focus this month: 1) ongoing selling following strong tech earnings and 2) broad weakness in commodity stocks on earnings disappointments (think Alcoa, U.S. Steel) and doubts over the sustainability for strong global demand.

Those trends are clearly evident again this morning:

1) Tech earnings continue to impress.

Microsoft ’s Q2 results easily beat Wall Street expectations ($0.74 vs. $0.59 consensus) on very strong sales of its new Windows 7 operating system. However, even though the software maker saw improvements in the consumer market, business spending remains weak.

Despite this solid report, just as with many of the other big-cap tech stocks after their earnings reports, investors are selling Microsoft on the news, with the stock down 1 percent today.

Additionally, techs are currently the second worst-performing sector since the market’s 15-month highs last week. Despite being 2009’s top-performing sector – it is now down over 7 percent in less than two weeks. Take a look at some of the big tech names in that period:

AMD down 12 percent

Hewlett-Packard down 9 percent

IBM down 8 percent

Cisco down 8 percent

Google down 8 percent

Texas Instruments down 7 percent

2) Commodity names continue to struggle.

a) Chevron is up fractionally despite reporting very disappointing Q4 earnings ($1.53 vs. $1.70 consensus). Although revenues significantly exceeded expectations ($48.7 billion vs. $40.5 billion consensus), lower oil and natural gas prices continued to put a big squeeze on its refining margins.

In fact, the oil giant’s downstream operations (refining) saw a $600 million loss in the quarter compared to a refining division profit of $2.1 billion in the year-ago quarter. Offsetting that loss, however, was a $4 billion profit in its exploration and production unit.

b) Arch Coal drops 8 percent after earnings and guidance missed estimates. The problem: coal pricing still is poor (down 10 percent from prior quarter), as demand remained weak throughout the year.

c) Commodity stocks have had a rough couple of weeks in particular. They are the worst-performing sector since last week’s highs, dropping 10 percent, doubling the S&P 500’s 5 percent decline. Some notable commodity names since January 19:

U.S. Steel down 29 percent

Freeport-McMoRan down 17 percent

Rio Tinto down 16 percent

Alcoa down 16 percent

BHP Billiton down 12 percent

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