By: Carlos Guillen, Research Analyst
After reaching a four week low early last week, the Philadelphia Semiconductor Index (SOX) has been recuperating some lost ground, and Monday it made some significant gains, stronger than the general market as measured by the DJIA. While most of the lost territory in the SOX has been the result of the European debt crisis, tech stocks have bounced back and appear ready to make more moves to the upside. From a technical perspective, the SOX has bounced off support at 335 and has failed to fall below that, indicating a continuing move to the upside.
Assisting the tech sector, and the overall market for that matter, were comments from St. Louis Federal Reserve Bank President James Bullard. While speaking at a conference in Tokyo, he acknowledged the seriousness of the euro-zone debt crisis but said that the global recovery at this point looks very strong and seems unlikely to be derailed.
Also earlier on Monday, according to the European Union's statistics office, output during April rose 0.8% month to month in the economy of the 16 nations using the euro. This result was higher than economists' projections which called for an increase of 0.5%. April's production level on a year over year basis spiked 9.5%, representing the highest increase since 1991, when data first began to be compiled on this metric.
So it is likely that the euro debt situation may now be fully priced in, and the market may begin to make modest moves to the upside. So far all indications are that world growth will continue for the rest of this year, and it will be led by emerging economies such as China, India, and Brazil. In fact, the Organization for Economic Cooperation and Development said on May 26 that the global economy may grow 4.6% this year with China expanding more than 11%, India growing 8.3%, and Brazil expanding 6.5%.
Disclosure: No positions