What a Week: Tech Hangs Tough

On Friday, two more reports helped back up the Conference Board reading. The University of Michigan said its revised consumer sentiment index for July rose to 96.7, above estimates of 96.2. And the National Association of Purchasing Management said its Chicago Purchasing Managers' Index rose more than expected in July, up to 64.7 from 56.4 in June.

Still, tech investors will be glad to flip the pages of their calendars to August on Monday. Despite this week's gain, the Nasdaq lost almost 8% for the month, its worst performance ever in July, according to Bear Stearns.

Verizon(VZ), the nation's biggest local phone company, got things started off on the right foot for the telecom sector on Tuesday, reporting that its second-quarter net income rose to $1.8 billion from $338 million a year earlier. Investors were particularly heartened to see that losses in Verizon's local line business were being offset by gains in wireless and high-speed DSL data service. Verizon Wireless added 1.5 million new subscribers in the quarter -- three times what rivals Sprint(FON) and Cingular reported.

Verizon shares gained 9% on the week and fellow carriers SBC Communications(SBC) and BellSouth(BLS) rose about 5% each as well.

RealMoney.com colleague Jim Cramer thinks the Baby Bells have reached a turning point with regulators giving up on rules that forced the companies to lease lines to competitors at wholesale discounts. He calls it the "brightest story out there."

It's less good news for the mother ship, AT&T(T), which saw Moody's slash its bond rating to junk status. AT&T said last week that thanks to the loss of discounts and plummeting revenues it was pulling out of the residential market. Nonetheless, shares of Ma Bell may have bottomed. They gained 6.5% on the week,

The bullish consensus isn't unanimous. Patrick Brogan and Scott Cleland at Precursor Advisors warn that improvements at the Bells may prove short-lived. The Bells are losing most of their local lines to competitors that don't rely on the now-withdrawn wholesale discounts. Cellular, cable and voice-over-Internet phone services accounted for 56% of lost lines at Verizon over the past 12 months and 72% at SBC, they wrote.

And not everyone is sanguine about the improving lot of semiconductor makers. Prudential analysts Mark Lipacis and Sam Adondakis looked into the latest inventory reports for chip vendors, distributors and buyers. After downgrading the sector to hold in April, they are sticking with their mostly pessimistic outlook.

"At this point there appears to be more hope than evidence of an accelerating demand environment," they wrote this week.

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