Cisco, Apple and the Nasdaq

For an economy that has been highly dependent on
government and corporate spending, Chambers’ outlook wasn’t very
encouraging. But on a day when Cisco was pounded for around 15%, and Google
(Nasdaq:GOOG), Microsoft (Nasdaq:
MSFT) and Apple
(Nasdaq:
MSFT)
all finished in the red, the Nasdaq as a whole actually posted a
gain.

Now, Apple alone accounts for 20% of the Nasdaq
100 (the 100 largest stocks on the Nasdaq). Throw in Google (4.2%),
Microsoft (3.6%) and Cisco 1.6%, and you’re looking at 30% of the Nasdaq
100. Nearly one-third of the Nasdaq 100 was lower on Thursday, easily the
most influential tech companies, and the Nasdaq managed a gain for the
day.

Strong Like Bull

Intel has clearly been left behind in the
handheld/potable wireless device boom. PC chips are pretty much
commoditized at this point. The growth is in chips for phones and
tablets. Companies like Qualcomm (Nasdaq:QCOM) and Nvidia (Nasdaq:NVDA)
are leading.

I have no doubt that Intel will make an
acquisition to get more exposure to the wireless device space, but hiring
a pop star to help drive new products is a clear indication that Intel is
feeling the heat.

Reader Mail!

Starting last week, we saw some of the market’s
biggest momentum trades sell-off on basically positive earnings reports.
I’m referring to Apple (Nasdaq:
AAPL), VMWare (NYSE:VMW), F5
Networks (Nasdaq:
FFIV) and many of the other tech companies that are helping
companies lower costs or are associated with the surge in handheld
gadgetry.

But last night, Qualcomm
(Nasdq:
QCOM)
reported good numbers and the stock is actually higher. NetFlix
(Nasdaq:NFLX), too. Though not in the same sector, Caterpillar
(NYSE:
CAT) is
also up after good numbers.

Could we be seeing a shift from the “sell first”
mentality that emerged last week?

Inflation And Interest Rates

The bears’ futile attempts to take stock prices
lower have been good sport to watch. The first level of support on the
S&P 500 is 1,280. The S&P 500 has closed above that level every
day since January 12. That’s 8 straight days.

Even last week, when it looked like a correction
was looming — after stocks sold-off on the good news from Apple
(Nasdaq:
AAPL)
and
IBM (NYSE:IBM) — the S&P 500 fell all the way to 1,271. But it didn’t
close there.

It’s a Correction!

I’ve been warning that a correction was coming for
stock prices for a few weeks now. And no, I’m not trying to point out
that I have any unique insight on this. It’s just that when the stock
market advances in a virtually straight line for 4 months, you start to
think investors and traders will take some profits at some point.

Corrections are inevitable and healthy for stock
prices, like a forest fire that clears out underbrush and old growth and
let’s new growth occur. OK, that may be a little dramatic, but you get
the point.

The New Technology Cycle

So far this earnings season, we are seeing a clear
separation between two of the stock markets leading sectors Starting with
Intel (Nasdaq:
INTC) and continuing with Apple (Nasdaq:AAPL) and IBM (NYSE:IBM), technology earnings were
fantastic in the fourth quarter.

But it should be clear that banks are still
grappling with the loss of mortgage business and the fallout from the
financial crisis. And quite simply, while the climate for banks has
certainly improved, as a group, they are not going to return to the
growth they enjoyed in the last decade anytime soon.