Amazon and the Virtuous Tech Cycle (amzn, akam, svvs, llnw, nflx, ibm, intc)

Corporate America kicked it up a notch last week. And the S&P 500 appears to be taking out resistance at 1,335.

Bloomberg reports that 71% of the 188 MSCI World Index companies that have reported Q1 earnings have beaten earnings. Earnings from this group of companies are beating expectations by 8.8%. And I'm sure when similar data is available for the S&P 500, we'll see similar statistics.

Despite rising commodity prices, profitability is jumping. That appears to be a combination of passing higher input (raw material) prices along and high productivity levels. Productivity was up 3.9% last year, the most since 2002.

But there's always a downside: labor costs fell 1.6% in 2009 and 1.5% in 2010. That's the first back-to-back drop in labor costs since 1962 and 1963.

*****As healthy as earnings growth has been, it's technology that's leading the way. Blowout quarters from Intel INTC and IBM IBM was followed up by Apple last Wednesday.

I've written about the virtuous tech cycle that's been a very important driver for stock prices for the last year. Powered by huge demand for smart-phones and tablet PCs, semiconductor stocks, wireless network stocks, and data stocks have been star performers.

(I've recently added a couple companies that are smack in the middle of the smart-phone/tablet boom to the Top Stock Insights portfolio. One is an $11 chip stock that supplies both the iPhone and iPad. The other is a $6 wireless network equipment stock that's testing new wireless antenna technology with Sprint.

Each stock has significant upside. If you are so inclined, you can get the details HERE. )

One area of the virtuous cycle that has been pushed to the forefront is data storage and hosting – what's known as cloud computing. When Amazon's AMZN Web Services website hosting and data storage business experienced outages last Thursday, many company websites went down, too.

If you don't know, cloud computing and hosting are big business, fueled by warehouses full of servers that deliver content and applications to the user. More and more, these data centers, as they are sometimes called are the backbone of the Internet economy.

Amazon's Web Services is among the best known data services. Akamai AKAM is another company that helps companies deliver data to the user. But given the problems at Amazon last week, I expect data center companies to be getting a lot more attention.

Companies simply can't afford to have their websites and services shut down because of a failure like Amazon's. And it's clear that not enough companies have taken steps to backup there systems.

A couple other stocks you may want to look at in this space are Savvis SVVS and Limelight LLNW. I understand that Limelight does some content delivery for NetFlix NFLX and Savvis has been a rumored takeover target.

And in case you think “cloud computing” is just another fad, there's a piece from Forbe's you might enjoy, you can read it HERE.

*****Don't overlook the ongoing connection between oil prices and economic growth expectations. Despite the ongoing protests in the Middle East and the consequent fear premium in the price of oil, oil and stocks rally together.

Of course, the weak dollar helps both. And so does strong earnings. Oil's move above $112 last week came alongside a strong, earnings-based move for stocks. And this time, unlike recently, oil stocks participated.