Why Tech Stocks Should Drive the Dow Higher Today
Jan 20th 2012 6:09AM
Updated Jan 20th 2012 6:10AM
Tech stocks took center stage last night. Three of the Dow Jones Industrial Average's (INDEX: ^DJI) five tech stocks -- Intel (NAS: INTC) , Microsoft (NAS: MSFT) , and IBM (NYS: IBM) -- reported earnings after the bell. All immediately rose in after-hours trading after beating earnings estimates.
Of the three, IBM traded up the most of the three after hours; 2.7% as of 8:00 last night. That's especially important, because IBM accounts for 11% of the Dow's weighting, while Microsoft and Intel each account for less than 2%. That means that even if all the other 29 Dow stocks are flat tomorrow but IBM holds on to its gains, the Dow would be up 0.3%.
But outside the Dow, one notable tech company didn't see its shares soar after hours: Google (NAS: GOOG) . The company missed earnings badly, pulling in $9.50 in earnings per share last quarter while analysts were expecting $10.51.
With no companies outside the tech sector reporting earnings last night and no earnings set for release this morning, it looks as though investors will be set to weigh Google's disappointing earnings against the success of IBM, Microsoft, and Intel. My hunch is that the positives will win out. Both IBM and Intel had very positive things to say about the global economy, and investors are looking for hints that the global economy hasn't been bogged down by Europe's deteriorating situation.
So while banking hogged the spotlight in yesterday's trading, look for tech to capture the market's imagination today. On the margin, last night's earnings from technology's leaders show that businesses are still spending -- especially in markets such as India, Indonesia, and China.
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At the time this article was published Eric Bleeker owns shares of no companies listed above. The Motley Fool owns shares of Intel, IBM, Microsoft, and Google. Motley Fool newsletter services have recommended buying shares of Google, Intel, and Microsoft and creating bull call spread positions in Microsoft and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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