Wall Street Beat: Tech Pushes Nasdaq to 18-month High

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Growing confidence has pushed the value of IT company shares up to levels not seen since late 2008, when the implosion of Wall Street sucked the air out of credit markets and dried up technology sales.

The tech-heavy Nasdaq hit an 18-month high Thursday, closing at 2391, its highest point since the end of August 2008. The broader Dow Jones industrial average and the Standard & Poor's 500 Stock Index rose to 17-month highs.

Lehman Brothers filed for bankruptcy 18 months ago this week, on Sept. 15, 2008. In the wake of the bank's failure, the financial industry and virtually all stock exchanges went into a tailspin. Tech companies suffered along with businesses in every sector.

This week, good macroeconomic news had a lot to do with the across-the-board market increases. For example, the Labor Department Thursday eased inflation fears with a report that its Consumer Price Index for February was flat, following a 0.2 percent increase in January. The Labor Department also said in a separate report that initial claims for state unemployment benefits fell 5,000 in the week to March 13. Earlier in the week, the Federal Reserve Board said its federal funds rate would remain near zero at least for the short term, in a sign that it still wants to keep interest rates low, a move that encourages lending and spending.

Tech vendors, however, have been helped by a steady stream of upbeat IT-specific news, and have led other sectors in the recovery from recession lows of a year ago. Nasdaq computer stocks are up by 73 percent in the past 12 months, while telecom stocks have jumped 53 percent during the same period. In comparison, the broader Dow Jones composite has risen 44 percent in the past 12 months.

This week, ABI Research issued a report on smartphone shipments that showed unexpected strength for the fourth quarter of 2009.

Smartphone shipments in the fourth quarter of 2009 jumped 25 percent from the prior quarter, ABI said.

"Granted, the fourth quarter is usually better than the third, but 3Q saw only a 3.6 percent growth over the second quarter," said ABI analyst Michael Morgan in the report. "The robust strength of this market's recovery is very encouraging indeed."

Apple had its best smartphone quarter on record while Nokia shipped 21 million smartphones compared to its usual 15 million to 16 million, ABI said.

IMS Research, meanwhile, said this week that annual smartphone shipments to Asia are expected to more than quadruple between now and 2015. This jump will give Asia 29 percent of total worldwide smartphone shipments during 2015, IMS said.

"The cellular markets in China and India continue to develop, especially with 3G networks expanding in China and expected to roll out soon in India," said IMS Research analyst Chris Schreck in the report. "Secondly, smartphones are becoming increasingly affordable. As the minimum hardware components required to support smartphone features continue to decline in price, smartphones have become mass market devices, rather than luxury purchases."

Reports on the computer sales front, meanwhile, continue to be positive. For example, retail sales of Macs rose 43 percent last month compared to February 2009, following a 36 percent year-over-year increase in January, the NPD Group reported this week.

Though the comparisons are to a period in which the hardware sector was at its recession low point, the increasing momentum of the sales figures is a good sign. Apple shares hit a record US$226.60 on March 12, retreating slightly to close at $224 Thursday.

The next round of quarterly sales reports are not due to start in earnest for another month. Meanwhile, the financials that are coming in are encouraging. This week, there was a silver lining in Palm's quarterly report. Though the company, as expected, lost money, losses were narrower than a year ago as sales increased. The company on Thursday said that net losses for the quarter ended Feb. 28 were $18.5 million, compared to $95 million a year earlier, as sales rose to $350 million from $91 million. Shares of Palm rose $0.28 to close at $5.65 Thursday, and rose slightly in after-market trading.

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