The New Trend to Watch

 | Oct 17, 2012 | 8:35 AM EDT  | Comments
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Stock quotes in this article:

bac

,

c

,

pep

,

ko

,

csx

,

nsc

,

intc

,

ibm

,

asml

,

cymi

,

lrcx

Tons of news. Bank of America (BAC) was OK, not great, especially when pitted against Citigroup (C). PepsiCo (PEP) was OK, not as good as Coca-Cola (KO). CSX (CSX) was better than expected away from coal and food and had more earnings power than Norfolk Southern (NSC). Intel (INTC) was miserable -- no shocker. IBM (IBM) was disappointing to some, but I think that it snaps back.

And then there is ASML (ASML) buying Cymer (CYMI) for a huge amount to help consolidate the bedraggled semiconductor capital equipment sector.

That's the most important story out there.

Let's be clear, there are two problems with tech, the slowdown in personal computers and the excess capacity because of a glut of players at every point in the food chain, from disks, to flash, to memory, to software, to controllers, to semiconductors, to semi equipment and to assembly of processors itself.

There's been very little consolidation except when Lam Research (LRCX) bought Novellus in the semi-cap equipment sector.

That was an outlier until today. No longer.

Tech is 20% of the S&P, 15% ex-Apple. That's way too big. There are too many players and too much money in the segment given that it is not growing away from the Internet.

The only real way to fix things is to have fewer players and that's what this deal does.

We need more of these deals across the board to ignite this sector and to make the shorts more fearful, as a stock like Cymer has had a ton of shorts for years.

This is suddenly THE trend to watch and could allow tech to catch a bid and join other, more robust sectors.

So, keep it in mind during the parade of earnings. It is a potential game changer in the worst-acting portion of the tech universe.

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