Two sectors that have performed well over the past year and are poised to continue moving upward in a recovering economy are technology and consumer discretionary, according to Benzinga.com. Additionally, the transportation sector seems to have some appeal because transportation is required to move finished goods.

Technology is prospering because consumers have an insatiable desire for innovation, while the latest technology gives businesses a much-needed competitive advantage. (More on technology).  The sector can be accessed through the iShares Dow Jones U.S. Technology Sector Index Fund (NYSE Arca: IYW), which is up 54.6% year-to-date.

The consumer discretionary sector has been pummeled by recent economic conditions as consumers remain loath to spend. As the recovery continues and confidence is regained, though, it’s wise to keep in mind that the most beaten-down areas offer the greatest potential for growth. (Why donsumer discretionary is hot).  It can be accessed through the Vanguard Consumer Discretionary ETF (VCR), which is up 39.6% year-to-date.

On the same token, since this is expected to be a soft recovery, it’s worth keeping an eye on the consumer staples sector, as well. The unemployment rate is at a 26-year high, which means that there are still millions of people feeling the pinch. When they shop, they’re looking for what they need, not what they want. PowerShares Dynamic Consumer Staples (NYSEArca: PSL) is up 17.5% year-to-date.

The transportation sector has been hit hard and will naturally improve as the economy does; even Warren Buffett seems good value in the sector, based on his recent acquisition of Burlington Northern (NYSE: BNI). (Where transportation goes from here).  It can be accessed through the iShares Dow Jones U.S. Transportation (IYT) which is up 13.4% year-to-date. For more stories on the transportation sector, visit our transportation category.

The shipping sector is another indicator of how the world is recovering. Once global demand resumes, shipping prices should recover and an increase in available ships will be moot. (What challenges are facing the shipping industry?) As consumers begin to spend more and nations struggle to rebuild, this sector will ultimately reflect a shift in tides. Claymore/Delta Global Shipping (NYSEArca: SEA), up 29.1% year-to-date.

Last, but certainly not least, consider emerging markets. While the United States recovery lags, that doesn’t mean there are no opportunities. Emerging markets have outperformed handily this year – iShares MSCI Emerging Markets (NYSEArca: EEM) is up 61.6% year-to-date, vs. the S&P 500, which is up 20.4%.

For full disclosure, Tom Lydon’s clients own shares of EEM.

Kevin Grewal contributed to this article.

The Labor Department reported that new claims for unemployment fell to the lowest number since Jan. 3. The figure was also below what economists had reported.

Wal-Mart (NYSE: WMT) reported that its profit were up 3.2%, although sales at stores open for at least one year were down slightly as economic conditions remained challenged. Wal-Mart has been a standout in the recession, thanks to being considered a low-price leader. The store attributed the drop in sales solely to falling prices, reports Stephanie Rosenbloom for The New York Times. Consumer Staples Select Sector SPDR (NYSEArca: XLP) was down slightly this morning; Wal-Mart is 10%. For more stories on consumer activity, visit our retail category.

Intel (Nasdaq: INTC) has been ordered to pay $1.25 billion as part of a settlement in an antritrust and patent case. Advanced Micro Devices had charged Intel with using strong-arm tactics to pressure PC and server makers to use its processors. In return for the settlement, AMD would withdraw its complaints, say Vindu Goel and James Kanter for The New York Times. iShares Dow Jones U.S. Technology (NYSEArca: IYW) is trading slightly lower this morning; Intel is 6%.

Treasury Secretary Timothy Geithner told Asian nations this morning that the Obama administration was committed to having a strong dollar. The dollar has recently hit a 15-month low on soaring budget deficits, reports Reuters.

The FDIC has ordered banks to prepay $45 billion in order to rebuild its deposit fund. The enormous rate of bank failures this year has drained the coffers, says Alison Vekshin for Bloomberg. The failures have led to a deficit in the fund for the first time since 1991.

For more stories on banks, visit our financial category.

Apple’s (NasdaqGS: AAPL) iPhone may be threatened by Motorola’s (NYSE: MOT) Droid, a smartphone serviced on Verizon’s (NYSE: VZ) network and powered by Google’s (NasdaqGS: GOOG) Android 2.0 operating system, according to The Week. (The smartphone push in China).

John Herman of Gizmodo believes that the iPhone is already so entrenched in the consumer world that it will still have a dominating presence. David Coursey of PC World argues that the Droid’s practical features are a good lure for consumers looking for something not already on the market.

MG Seigler at TechCrunch sees that Google isn’t trying to undermine iPhones, but rather sell its operating system, which works on a range of different devices. (Four reasons to watch global telecom).

Many are arguing that the Droid is the most sophisticated mobile device from a hardware standpoint to hit the market, reports Michael Arrington for The Washington Post. The Droid smartphone may be as thin or thinner than the iPhone 3GS, with a slide out physical keyboard and removable battery.

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

• Vanguard Telecom Services (NYSEArca: VOX): up 13.2% year-to-date; Verizon is 20.3%

• iShares Dow Jones U.S. Technology (NYSEArca: IYW): up 46.4% year-to-date; Apple is 9%, Google is 6.5%

• iShares S&P Global Telecommunications (NYSEArca: IXP): up 5.7% year-to-date; AT&T is 15.3%; Verizon is 8.2%

• Technology Select Sector SPDR (NYSEArca: XLK): up 35.5% year-to-date; Apple is 7.7%; AT&T is 8.9%; Google is 4.8%; Verizon is 4.5%

For full disclosure, Tom Lydon’s clients own shares of XLK.

Max Chen contributed to this article.

Recent gains in the technology sector are attributed to improved results and upgrades in Google Inc. (NasdaqGS: GOOG), Advanced Micro Devices (NYSE: AMD) and Intel Corp. (NasdaqGS: INTC), reports Benjamin Pimentel for The Wall Street Journal.

Additionally, some solid earnings have emerged from the sector in recent days:

• Intel reported better-than-expected quarterly profits, along with revenue ahead of previous projects. Intel is considered by many as a bellwether for the technology sector and economy as a whole. (Read more about semiconductors).
• Google announced a 27% increase in third-quarter profits, beating analysts’ expectations. A recovering economy upped demand for online ads and e-commerce, the search engine giant said.
• IBM (NYSE: IBM) reported that its earnings rose 14% from the same period last year, surpassing expectations.

A rash of mergers and acquisitions have been seen in the technology sector, and an industry group is forecasting more. As the economy recovers, the firm says, technology companies will no longer hesitate to acquire other companies. Year-to-date, 48 companies have been acquired. In all of 2008, 45 acquisitions took place, Reuters reports.

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

• Technology Select SPDR (NYSEArca: XLK): up 40.4% year-to-date; INTC is 4.8%, GOOG is 4.8%

• iShares Dow Jones U.S. Technology Sector Index Fund (NYSEArca: IYW): up 52.8% year-to-date; INTC is 6.0%, GOOG is 6.5%

Max Chen contributed to this article.

JPMorgan Chase & Co. (NYSE: JPM) is one of the first banks up to report third-quarter earnings, and the results are cheering Wall Street. The bank reported a $3.59 billion profit, but also stated that it had about doubled the money set aside for home and credit loan defaults in the quarter, reports Stephen Bernard for the Associated Press. Financial Select Sector SPDR (NYSEArca: XLF) is up more than 2% this morning; JPM is 12.3%.

Tech bellwether Intel (Nasdaq: INTC) also made good on its assurances that the PC market is slowly beginning to reboudn by reporting results that, while glum, surpassed expectations. The chip-maker reported that profits and sales dipped 8% in the third quarter. iShares Dow Jones U.S. Technology (NYSEArca: IYW) is up about 1.25% this morning; Intel is 6%. More on why semiconductors are doing well.

Oil prices have hit a one-year high above $75 a barrel thanks to new lows for the U.S. dollar, reports Claire Rangel for The Wall Street Journal. The dollar hit a 14-month low against a basket of currencies. Oil is priced in U.S. dollars, so as the dollar weakens the commodity becomes cheaper for those overseas.

Business inventories in August were cut for the 13th straight month, dropping 1.5%. It was more than what analysts had expected. On the flip side, sales by manufacturers, wholesalers and retailers rose 1%. Much of the boost came from the “cash for clunkers” program, reports Martin Crutsinger for the Associated Press. Read about the holiday sales outlook here.

For more stories on oil, visit our oil category.

September retail sales rose 0.6%, better than what analysts had expected. Retailers have been hurting for more than a year now as consumers have increasingly tightened the grip on their wallets, reports Kevin Kingsbury for The Wall Street Journal. Despite the increase, the bad news is that retail sales are at 2005 levels. SPDR S&P Retail (NYSEArca: XRT) is up more than 2% this morning. (Read more about the retail sector here).

Alcoa (NYSE: AA) notched a surprise profit after the market closed yesterday through a combination of cost-cutting steps and higher aluminum prices, reports Reuters. The report comes after three straight quarterly losses. Wall Street had expected another loss. iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM) is up nearly 3% this morning. Alcoa is 3.7%.

The number of newly laid-off workers filing for unemployment has dropped to the lowest number since the  start of this year. It’s the fourth drop in new claims in five weeks, and is being taken as a sign that some healing in the job market is still taking place.

The European Central Bank and the Bank of England both opted to keep their interest rates unchanged, leaving them at record lows of 1% and 0.5%, respectively, report George Frey and Robert Barr for the Associated Press. While the eurozone’s two largest economies – France and Germany – are technically out of a recession, authorities want to keep growth moving in the right direction. The iShares MSCI EMU (NYSEArca: EZU) is up more than 2% this morning. You can read more about Europe’s recovery efforts here.

August wholesale inventories declined for a record 12th straight month in August. This indicates that companies are shrinking orders to factories. But more encouraging is that sales at the wholesale level rose by the largest amount in 14 months, reports Martin Crutsinger for the Associated Press.

Cisco Systems (Nasdaq: CSCO), IBM (NYSE: IBM), AT&T (NYSE: T), Intel (Nasdaq: INTC) and many others are all involved in a grand modernization plan for America’s “Smart Grid,” writes David Fessler for Investment U.

The National Institute of Standards (NIST) recently prepared the standards that the Commerce Department wants implemented for the electrical power grid. The plan details the integration and connection of smart meters, including data sharing on energy usage among utilities and cyber-security standards.

NIST requires internet-protocol (IP) technology in systems connected to the “Smart Grid.” This is good news for Cisco, a leader in IP technology. One potential problem with IP technology, however, is the vulnerability to hacking.

The Obama administration has earmarked $4.5 billion for the “Smart Grid” project and the beneficiaries include Cisco, IBM, AT&T and others.

• Technology Select Sector SPDR (NYSEArca: XLK): up 33.1% year-to-date; T is 8.1%, CSCO is 6.6%, IBM is 8.6%, INTC is 4.6%

• iShares Dow Jones US Technology (NYSEArca: IYW): up 43.4% year-to-date; IBM is 9.1%, CSCO is 7.3%, INTC is 6.5%

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

Max Chen contributed to this article.

Technology

Technology continues to be a hot topic with investors for some of the following reasons:

• Consumers love and rely on technology, and they insist on name brands regardless of the economy; just look at sales of the newest iPhone, and we’re in a recession
• Moody’s recently upgraded the sector to “stable”
• NASDAQ is outperforming other indexes year-to-date; it’s up 33.3% while the S&P 500 is up 16.5% and the Dow is up 10.3%
• Semiconductor and PC demand are expected to stabilize this year and then surge in 2010

Nat Worden for The Wall Street Journal suggests taking a look at the SPDR Technology Select Sector (NYSEArca: XLK),which is up 36% year-to-date.  XLK tracks 85 technology companies, has nearly $3.7 billion in assets and enables one to grab exposure to tech giants such as Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: APPL).

The iShares Dow Jones U.S. Technology Sector Index Fund (NYSEArca: IYW) which is up 46.4% year-to-date and includes heavy exposure to MSFT and APPL, as well.

The PowerShares Dynamic Technology (NYSEArca: PTF) which is up 30.7% year-to-date and includes exposure to MSFT, APPL and more.

The First Trust NASDAQ-100 Tech Index (NasdaqGM: QTEC) which is up 62.3% year-to-date and includes equal-weighted exposure to the technology stocks that make up the Nasdaq 100.

For more stories on technology, visit our technology category.

Kevin Grewal contributed to this article.

The technology sector is booming today on the news of two big names in the industry:

• Intel (INTC): Intel Corp. raised its third-quarter revenue forecast above Wall Street’s expectations Friday, based on strong chip demand. This is giving a good indicator that the business is growing and improving, reports Barbara Ortutay for Associated Press. Intels’ shares were up 5% as of morning trading.

• Dell (DELL): The personal computer industry is healthy, as Dell is posting decent second quarter results. Profit fell 23% and sales fell 22% in the May-July period. The results beat Wall Street’s forecasts, however, sending the shares up more than 6%, reports Jordan Robertson for Associated Press.

If you bought shares in Apple (AAPL) or Microsoft (MSFT) in the early days, you were handsomely rewarded for your choice. However, what are the chances that most investors would pick one company in a sector of hundreds and have it pay off so well? ETFs can give investors a safe and cost-effective method to invest and play the sector as technology rises higher, says Ron Rowland for The Market Oracle.

With tech ETFs, you don’t have to choose just one or two companies, and you can get broad exposure at a low cost.

• Select Sector SPDR (XLK): up 32.4% year-to-date

• iShares Dow Jones U.S. Technology (IYW): up 41.8% year-to-date

• iShares S&P North American Tech Software (IGV): up 31.7% year-to-date

For more stories about technology, visit our technology category.

Microsoft (MSFT) and Yahoo (YHOO) have reached a 10-year web search deal and advertising partnership after years of speculation about a delay. Microsoft is the world’s biggest software firm and Yahoo is the leading online portal, and together, they could create a major rival to Google (GOOG).

The alliance may be a boon to both companies. The Economist explains that Microsoft will significantly increase the use of its search service, Bing, as well as its online advertising platform. This means Yahoo will no longer need to spend money on its search and ad technologies.

Here are more highlights, according to Barry Schwartz for Search Engine Land:

• Microsoft will acquire an exclusive 10-year license to Yahoo’s core search technologies, and Microsoft will have the ability to integrate Yahoo search technologies into its existing web search platforms.
• Microsoft’s Bing will be the exclusive algorithmic search and paid search platform for Yahoo sites. Yahoo will continue to use its technology and data in other areas of its business.
• Yahoo will be the sales force for both companies premium searches, however, each company will maintain its own separate display advertising business and sales force.

After regulatory approval, the deal will be in place and in working order by 2010.

ETFs may be the best play on this deal, because questions still remain about its ultimate impact. Will Google continue to thrive, or will this new alliance shrink its search engine market share? An ETF can cover all your bases.

• Technology Select Sector SPDR (XLK): up 29% year-to-date; Microsoft 10.3%; Google 4.9%; Yahoo 1.3%

• iShares Dow Jones U.S. Technology (IYW): up 37.8% year-to-date; Microsoft 12.2%; Google 6.5%; Yahoo 1.3%

For more stories about technology, visit our technology category.

For full disclosure, Tom Lydon’s clients own shares of XLK.