Tuesday Look Ahead: Is Tech Sending a Message?

While Greece is front and center for markets this week, some traders are watching the rally in tech with interest.

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The technology sector was a close tie with energy to be the biggest loser in the month of June, at the end of last week. But by Monday afternoon, energy was left behind, with tech rallying 1.4 percent. The S&P technology sector is now down 5.95 percent, second to energy's 6.95 percent June decline.

Tech was also on the move last week, outperforming the S&P 500's 0.2 percent gain with a half percent improvement. The SOX semiconductor index gained 0.7 percent Monday, and it is down 10 percent for the month of June.

"If you go back a little further, they (tech) were bottoming on a relative basis. I think part of the story is if the macro story gets better, I think you're going to see dollars flow to tech," said James Paulsen, Wells Capital Management chief investment strategist. "Those Japanese (supply chain) distortions are going to disappear. Tech was part of that downdraft and certainly could be part of that updraft."

Monday's tech rally was led in part by Microsoft , which jumped 3.7 percent ahead of its Tuesday announcement of a new version of its Office software that would be accessible via the internet. Nasdaq was also helped by the move, rising 1.3 percent Monday to 2688, on top of last week's 1.4 percent gain. Other tech winners include internet retailer Amazon , up sharply after Morgan Stanley added it to its "best ideas" list and said its sales growth could outperform estimates.

Paulsen said small and mid-size cap techs may be a better place to play a rebound. "I really think if we accelerate in the second half, there'll be a stronger reacceleration in smaller companies," said Paulsen. He said Apple's iPad, while good for Apple , hit some big tech names as customers added i Pads instead of new laptops or desktops.

"The small device that does almost everything well, but a spread sheet, and that has blasted the tech world...I do think there's a transition that's really gone on in the biggest of the big, where Apple really did upset the apple cart there. The upper cap index is dominated by just a few players so you're bet is more company specific among large caps than it would be for small and mid caps," Paulsen said.

"I don't know if the stock market stays in the doldrums in July and August or it's going to start to pick up now. I've got to believe if we have a reacceleration in macro growth that tech is going to lead this time," he said.

Greek Drama

The Dow vaulted 108 points or 0.9 percent Monday to 12,043, and the S&P 500 rallied by 11 points to 1,280. Financial shares gained 1.1 percent after global bank regulators said banks need to increase reserves by 2.5 percent, less The euro also jumped as investors became more assured Greece would get its funding. The Greek parliament votes on a new budget and austerity plan Wednesday. There also appeared to be progress Monday to involve the private sector when French President Nicolas Sarkozy confirmed that French banks agreed to roll over Greek debt.

"Everyone is so set on the Greek issues that the U.S. data is taking a back seat," said John Canally, economic strategist at LPL Financial. "Once that's settled, they'll focus back on the soft spot, and we still think there's a couple more weeks of weak data and then you'll start to get the rebound in July."

Tuesday's data includes S&P/Case Shiller home price data at 9 a.m. ET, and economists are expecting a 3.9 percent decline. Consumer confidence is released at 10 a.m. There is a $35 billion 5-year note auction at 1 p.m.

The IMF may also name a new leader as early as Tuesday, and French Finance Minister Christine LaGarde is expected to get the position.

But Greece will remain center stage, as national unions called strikes for Tuesday and Wednesday as the parliament debates the austerity measures, required by the IMF and EU.

"It's all about Greece and the contagion effect. If it gets resolved, then that's great. I think the (U.S.) ISM (manufacturing data could come pretty close to 50, and that's further reminder that 'my goodness! This is getting pretty serious here,'" said Canally. "But all of this is going to reverse, and you're going to see a big increase in auto production; Japan's coming back on line and gasoline prices are falling and will continue to fall."

Other hurdles for stocks include the U.S. debt ceiling debate and quarterly earnings, which start with Alcoa's release next week. Canally said some of the comments could be negative. "If you're a company that didn't execute on your sales plan for the quarter, you have a laundry list of things you could blame.. I still think earnings expectations are too high for the second half."

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