Micron Technology (MU)

[TREND1]

RISING RATES COULD HURT TECHNOLOGY... Stocks are having a strong day with most major stock indexes hitting record highs. Not surprisingly, bond proxies like utilities are lagging behind as are defensive consumer staples. Technology, however, is also lagging. Some of that may be due to disappointing earnings. But there may be more at work here. My July 14 message carried the headline "Rising Bond Yields Can Be Bad for Technology Stocks". It also suggested that higher rates during the second half could make the going tougher for that group as money rotates into more value-oriented parts of the market like financials. Technology stocks have also gotten a bigger boost from a falling dollar than other sectors. Technology companies get 57% of their revenues from foreign markets (the only sector over 50%). Any serious uptick in U.S. interest rates could be supportive to the dollar which, in turn, could have a dampening effect on technology revenue. The only thing holding the Fed back from raising rates is low inflation. Rising commodity prices, however, could give the Fed more room to raise rates later this year. That would help financials while hurting technology stocks. Especially if a Fed rate hike leads to a higher dollar

BY JOHN MURPHY