The NASDAQ Composite Index broke 3,000 on Tuesday, March 14, for the first time since 2000. The 11-year high for the index brings back memories of those days in 2000 when the dot.com bubble pushed the technology-laden index to a high of 5,048.62. (The 500 or so technology stocks that trade on the NASDAQ market account for almost 50% of the market-capitalization weighted index.)

But breaking the 3,000 level isn’t either a signal to put the champagne on ice so it will be chilled when it’s time to celebrate the NASDAQ hitting 5,000 or to run in fear yelling “The sky is falling again.”

Truth is, this isn’t your father’s technology sector. We’re not headed to the moon or into the abyss. Which is why even at 3,000 this is a good time to invest in technology stocks. As long as you understand the big differences between the current technology market and that of 2000.

I can think of four major differences. Read more

I’ve posted repeatedly in the last few weeks that it would be hard for this rally to extend a lot further unless we got leadership from financial stocks.

Financials jumped yesterday, November 4—and that may mark the leadership I’ve been looking for.

The Financial Select Sector SPDR ETF (XLF) has been trapped in a range for the last six months that has topped out at $15.00 or so. Every time the sector has built up a head of steam, it has driven up to that level and then pulled back.

Yesterday looks like the sector finally might have enough energy to break out to new levels. From the start on November 4 at $14.89 the sector ETF (exchange traded fund) moved steadily higher throughout the day and finally closed at $15.23.

The sector had the benefit of a lot of positive news, rumors, and sentiment.

The biggest was the general rally set off by the Federal Reserve’s announcement that it would buy $600 billion in Treasury bonds by next June. Financial markets around the world saw that money as a huge injection of capital that would propel prices of stocks, real estate, and other assets higher. Asia markets rallied which helped European markets rally which helped New York markets rally.

The financial sector also got a boost late in the day from rumors circulating around 3:30 ET that the Fed would allow well-capitalized banks to raise dividends.

For the day JPMorgan Chase (JPM) gained 5.5%. U.S. Bancorp (USB) was up 4.6%. Wells Fargo climbed 3.8%. And Bank of America (BAC) moved up 5.3%.

The momentum in the sector completely overwhelmed a report from Standard & Poor’s, released at 2:30 ET, that the big banks faced a cost of $43 billion to buy back mortgages from investors in mortgage-backed securities. The banks, S&P reported, have already put aside $12.4 billion toward these costs, leaving them with an outstanding problem of $31 billion.

Yesterday, nobody cared.

The charge in financial stocks got backed up from other critical sector, technology—or actually to be specific, chip stocks. Read more

Update ASML Holdings (ASML)

I’ve been waiting to see what ASML Holdings (ASML) competitor Veeco Instruments (VECO) would report on July 26. ASML Holdings reported on July 14, the same day as Intel (INTC) and I didn’t want to up my target for ASML Holdings simply out of enthusiasm for Intel’s performance. (For more on Intel’s earnings see my post Update Intel (INTC))

Two weeks later however, Veeco confirmed strength in the chip manufacturing sector. The company announced earnings that beat Wall Street projections by 18 cents a share and revenue projections by 8%, and then raised guidance for the third quarter.

That confirms the July 14 numbers out of ASML Holdings: earnings 17% above projections for the second quarter, revenue 8% above expectations and guidance for fiscal 2010 sales to grow 10% to 15% above historical peak sales. Orders for ASML Holdings lithography equipment, used to etch circuits onto silicon, were 1.18 billion euros in the quarter. That drove the company’s order backlog to 2.4 billion euros as of the end of June.

ASML Holdings was confident enough about growth to predict that it will continue at current levels into 2011. Read more

EMC earnings show continued strength in technology hardware

Not the home run that Intel (INTC) hit with its earnings but EMC’s (EMC) results back up my theory that technology hardware companies with new products offering more power at lower prices and lower operating costs will show strength in 2010 even if the economy stumbles.

In my June 20 post “There’s less bad news in IBM’s earnings than Wall Street thinks” (http://jubakpicks.com/2010/07/20/theres-less-bad-news-in-ibms-earnings-than-wall-street-thinks/ ) I argued that Wall Street had misunderstood the lessons of IBM’s and Intel’s second quarter earnings. Not all technology stocks would report better than expected results for the quarter and guide higher for the year, as Wall Street concluded after Intel’s earnings. Technology hardware companies with new products that promised attractive short-term returns, however, would do well despite IBM’s disappointing results.

Intel was one of these in my opinion. Cisco Systems (CSCO), due to report on August 11, was likely to be another. And EMC, which reported second quarter earnings this morning, would give me a quick test of my thesis.

Today’s (July 21) results from EMC support my argument, I think. Read more

Buy ASML Holding (ASML)

Talk about rebounds.

In 2009 this maker of lithography equipment used to etch computer circuits onto silicon lost 45 cents per ADS (American Depository Share).

In 2010 Standard & Poor’s is projecting that the company will make $2.41 per ADS.

The reason for the rebound in earnings is pretty simple. Read more