Wall Street Beat: Tech Stocks Hit Yearly High

Tech stocks hit a yearly high in U.S. markets Thursday as industry watchers pored over upbeat reports about server shipments and online spending, but ongoing worries about unemployment continue to dog businesses in all sectors of the economy.

The tech-heavy Nasdaq closed Thursday at 2579.35, exceeding by less than a point its prior high for the year, set Nov. 5. Computer stocks closed on the Nasdaq up 14.5 percent for the year. At this point, the Nasdaq Composite Index — as well as broader indexes such as the Dow and S&P — is back at the level it was before the stock market plunge of October 2008, after Lehman Brothers collapsed.

Worries about European sovereign debt, unimpressive jobs and housing data, as well as a Cisco warning several weeks ago about a dip in global government spending, caused tech stocks to stumble in mid-November along with share prices of businesses in a wide variety of sectors. But European Central Bank purchases this week of Portuguese and Irish debt, stronger-than-expected U.S. retail sales data, and a fusillade of upbeat tech-sector reports helped push stocks back up to yearly highs.

Cyber Monday — the first Monday after the U.S. Thanksgiving holiday — marked a major step for e-commerce: for the first time online spending surpassed US$1 billion for a single day, hitting $1.028 billion online on that day alone, according to ComScore. That amount was a 16 percent jump over Cyber Monday spending last year, suggesting that forecasts for strong online sales for the end-of-year holiday shopping period may turn out to be correct.

In hardware, both IDC and Gartner reported strong server data for the third quarter. Gartner said that global server shipments totaled 2.2 million, jumping 14.2 percent from the same period last year. Server sales hit $12.29 billion, up 15.3 percent year over year, Gartner said.

IDC noted that it was the third consecutive quarter of year-over-year revenue growth for servers and the fastest quarterly revenue growth in that market since 2000.

“The server market experienced its strongest growth in 10 years in the third quarter of 2010,” said Matt Eastwood, group vice president at IDC, in a statement. “All geographic regions exhibited positive growth for the second consecutive quarter as the infrastructure build-out and refresh extends across SMB, enterprise, public sector, and cloud/hoster organizations.”

On the PC front, there are some clouds in the Gartner forecast for the year, as the market researcher cut shipment estimates due to concerns that economic uncertainty would dampen demand. Worldwide PC shipments are on pace to total 352.4 million units in 2010, a 14.3 percent increase from 2009 but down from earlier estimates of 19.9 percent growth.

But even though Gartner shaved a few percentage points off its 2011 PC forecast as well, it is still predicting a healthy 15.9 percent increase.

As 2010 heads to a close, it’s clear that the IT sector has had an upbeat year and is poised for further growth. IT revenue growth will be 3 percent to 4 percent in 2010 in OECD countries, according to a new Information Technology Outlook report from the organization, representing principally in Europe, North America and Australasia nations.

The question now is whether growth will continue in 2011 and get back to pre-recession levels. A lot depends on the employment picture, since worries about jobs could dampen consumer spending. “In the near term, many consumers and businesses will continue to refrain from buying PCs, as they collectively rebuild their finances in the face of slower income growth, weaker employment gains and a cloudy economic outlook,” Gartner said in its PC report this week.

Friday morning, the U.S. Labor Department issued a jobs report said that the jobless rate rose to 9.8 percent in December. The unexpected increase dampened a market rally that had been building up for a few days. By late morning the Nasdaq was down by 1.4 points and the Dow was down 12.82 points to 11349. The declines don’t wipe out the gains made so far this week, but it is clear that unemployment needs to be eased in order for sustained spending increases to occur.