Market Overview

Time For Tech? Tech ETFs That Is


With earnings reports from technology Goliaths Google (Nasdaq: GOOG) and Dow components International Business Machines (NYSE: IBM) and Intel (Nasdaq: INTC) scheduled for Thursday after the close, the time might be right for investors to have a look at some ETFs that are devoted to the technology sector.

S&P Capital IQ is bullish on three of the largest and most familiar tech ETFs, announcing today that it has Overweight ratings on the PowerShares QQQ (Nasdaq: QQQ), the Technology Select Sector SPDR (NYSE: XLK) and the Vanguard Information Technology ETF (NYSE: VGT).

In the note, S&P Capital IQ says tech spending has been adversely impacted by Europe's sovereign debt crisis while adding "Growth in China, which has been a major driver of technology spending, is expected to decline to 7.8% this year from 9.2% in 2011. In the U.S., the unemployment rate remains stubbornly high, dampening consumer spending and the housing market. Another factor is the hard-disk drive shortage after the flooding in Thailand. It may take a couple of quarters before inventory levels are replenished. In the meantime, the shortages will adversely affect supplies of PCs and prices of drives."

The research firm sees positive signs in the form of improving U.S. employment and said the second half of the year could see a boost to the tech sector when Microsoft (Nasdaq: MSFT) rolls out Windows 8.

S&P Capital IQ is top-rated tech ETF is the PowerShares QQQ, which tracks the Nasdaq 100. The ETF has an expense ratio of 0.2% and over $28 billion in AUM. Apple (Nasdaq: AAPL), Microsoft, Google, Oracle (Nasdaq: ORCL) and Intel combine for about 40% of QQQ's weight.

S&P had this to say about VGT: "VGT's objective is to track the MSCI US Investable Market Information 25/50 Index. It has achieved that goal over the trailing three years, returning 23.5% on an annualized basis versus the benchmark's 23.2%. All three of our performance analytics measurements are positive, including S&P STARS, S&P Fair Value, and S&P Technical. VGT's risk considerations scores are generally positive, as are its cost factors."

VGT has an expense ratio of 0.19%, $2 billion in AUM and its top-five holdings are Apple, IBM, Microsoft, Google and Intel.

S&P Capital IQ was similarly bullish on XLK, which has an expense ratio of 0.2% and AUM of over $8.3 billion. Apple, Microsoft, IBM, AT&T (NYSE: T) and Google are that ETF's top-five holdings.

Posted-In: Analyst Color Earnings Long Ideas News Sector ETFs Broad U.S. Equity ETFs Short Ideas Previews


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