Technology ETFs Take the Lead After Market Correction

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U.S. markets have somewhat recovered from the recent stumble, and technology and sector-related exchange traded funds are leading the charge as investors look back into the growth trade.

The Technology Select Sector SPDR Fund (NYSEArca: XLK), which tracks technology companies in the S&P 500, returned 3.7% over the past week and was the best performing S&P 500 sector-related ETF. In contrast, the S&P 500 was up 2.1% over the past week.

Among the better performers within the tech segment over the past week, the SPDR S&P Internet ETF (NYSEArca: XWEB), which is comprised of internet names taken from the S&P Total Market Index, advanced 7.2% while semiconductor-related PowerShares Dynamic Semiconductors Portfolio (NYSEArca: PSI) and First Trust Nasdaq Semiconductor ETF (NasdaqGS: FTSL) increased 7.2% and 6.4%, respectively.

Three technology giants - Amazon (NasdaqGS: AMZN), Microsoft (NasdaqGS: MSFT) and Netflix (NasdaqGS: NFLX) - have fueled nearly half of the S&P 500's advance this year, reports Akane Otani for the Wall Street Journal.

“When you see a Netflix or Amazon leading, it’s not necessarily a great sign of investor confidence, since you know those names can always deliver growth no matter what’s going on,” Jack Ablin, founding partner and chief investment officer at Cresset Wealth Advisors, told the WSJ.

The S&P 500 technology sector has contributed to more than three quarters of the broader index's gains, according to S&P Dow Jones Indices.

After surging 37% last year, technology remains a favorite among investors, despite data suggesting technology stocks are relatively expensive as they trade at elevated price-to-earnings compared to the broader S&P 500. Roughly a third of global fund managers say they are overweight tech in their portfolios, according to a recent Bank of America Merrill Lynch survey.

“When you have something that can really grow and innovate, there’s really no limit to the upside,” Thomas Plumb, president of Wisconsin Capital Management, told the WSJ.

For more information on the tech sector, visit our technology category.

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