By Sam Boughedda
Jefferies analysts believe the US technology sector has suddenly found itself "encompassed in a 'sweet spot.'"
In a note to clients Tuesday, they explained that this is due to falling long-term rates cushioning multiples and "less bad" macro data points providing better base effects.
"While the IT sector is the most immune to tightening in credit conditions, its customers are some of the most vulnerable. We remain Modestly Bullish," the analysts stated.
"In the midst of a mini-banking crisis, the US IT sector is flourishing," they added. "At first glance, the move in US IT shares seems counterintuitive as they seem to be acting as 'defensive growth', an oxymoron. Indeed, some investors might define the recent rebound as a 'bear market rally'. However, there are some mitigating factors."
The analysts believe one of those mitigating factors is that macro data points for the IT sector not being as negative as the broader economy — possibly helped by overseas demand.
"February – admittedly the last data point – saw the Global Electronics PMI rise to 51.4 – the rate of growth was the fastest since last July, helped by new orders and output," they explained.