According to James Brumley from Investopedia, the technology sector had the second-most upside earnings surprises last quarter, with 88.7% of its large-cap stocks showing upside surprises, boasts the lowest projected 5-year PEG ratio of 1.1 versus the market average of 1.4 and experienced the greatest revenue growth of 8.8% year-over-year last quarter, as stated in iStockAnalyst. [Why Tech ETFs May Be Leading the Way.]

Brumley observes that investors who were burned during the tech bust in the last decade are now overly cautious on the sector. He also adds that the next cycle could lead to excessive and even dangerously high confidence in the tech sector again.

Tech shares dipped on Monday trading after reports that Google would reduce its Web presence in China, according to ONN.tv. China and Google have been in heated talks over censorship in search results on the Web search engine. Google is continuing talks with China, but advertisers are already being advised by industry insiders to switch to rival companies.

For those who don’t like picking out individual stocks, consider investing in an ETF.

Technology Select Sector SPDR (NYSEArca: XLK). XLK tries to reflect the performance of publicly traded equities of companies in the technology economic sector. The fund invests at least 95% of assets in companies of the tech sector including industries from internet and IT services, software, computers, peripherals, electronics, semiconductor equipment and telecommunications.

Top holdings include: Microsoft Corporation (NASDAQ: MSFT) 10.29%, Apple Inc. (NASDAQ: AAPL) 8.3%, International Business Machines (NYSE: IBM) 7.51%, AT&T Inc. (NYSE: T) 7.23% and Google Inc. (NASDAQ: GOOG) 6.53%.

iShares Dow Jones U.S. Technology (NYSEArca: IYW). IYW tries to reflect the performance of the Dow Jones U.S. Technology Index. The fund invests holds a minimum of 90% of assets in securities of the underlying index and depositary receipts representing securities of the underlying index. The remainder of the assets are invested in securities that will help the fund track the underlying index.

Top holdings include: Microsoft Corporation (NASDAQ: MSFT) 12.07%, Apple Inc. (NASDAQ: AAPL) 9.37%, International Business Machines (NYSE: IBM) 8.71%, Cisco Systems Inc. (NASDAQ: CSCO) 6.97% and Google Inc. (NASDAQ: GOOG) 7.46%.

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

Max Chen contributed to this article.

Dr. Ed Yardeni of Yardeni Research believes that sectors and industries that outperformed and underperformed the market during the first year of the bull market will do so again for this year, writes Josh Lipton for Minyanville. Yardeni says that tech will come out ahead this year and “industry analysts are raising both their 2010 and 2011 estimates as the sector continues to deliver more positive earnings surprises than the other sectors.” [Tech ETFs: A Way to Avoid the Guesswork.]

The tech sector’s top performers have some things in common, such as companies that have big global footprints and strong, clean balance sheets. Additionally, valuations look attractive, tech companies are continuing to put up record revenue numbers and capital expenditure may begin to increase.

Cisco Systems (NASDAQ: CSCO) climbed ahead of news on how the company could help telecommunications companies boost Internet speed to meet growing demand, reports Peter A. McKay for The Wall Street Journal. The news also lifted telecom stocks.

The majority consensus on Wall Street is that a second round of recession isn’t likely, but participants remain skeptical about whether new bets on the markets are justified, considering the strength of the recovery. The Nasdaq is up 83% since the March 9 low of last year.

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

• PowerShares QQQ (NASDAQ: QQQQ)
• First Trust NASDAQ-100-Tech Index (NASDAQ: QTEC)
• iShares Dow Jones US Technology (NYSEArca: IYW)
• Technology Select Sector SPDR (NYSEArca: XLK)

If you would rather have leveraged tech investments take a look at these. But just know the risks and how they work – leverage isn’t for everyone. [All About Leveraged and Inverse ETFs.]

• Direxion Daily Technology Bull 3X Shares (NYSEArca: TYH)
• Ultra Technology ProShares (NYSEArca: ROM)

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

Max Chen contributed to this article.

Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) or Google (NASDAQ: GOOG) or (insert your technology giant here).

Why pick one when you can invest in all of those, and then some, with one ETF? There’s a lot of uncertainty in the tech sector as the big players branch out into new areas. Maybe all of them will be successful in their ventures, or perhaps only one or two will see big rewards. [Bulls Out on Tech ETFs.]

By using a technology ETF, you eliminate the need for guessing by giving yourself exposure to the entire sector, which is enjoying a resurgence. According to a PricewaterhouseCoopers’ report on the technology sector, deal activity should increase this year as balance sheets get stronger, credit markets loosen and valuations improve.

Hewlett-Packard (NYSE: HPQ) reported a strong fiscal first quarter, noting huge sales and profit gains. The CEO proved that brevity is the soul of wit by noting simply, “The market is better.” HP had $31.2 billion in sales and income of $2.3 billion. That’s a 25% increase on numbers from a year earlier. [How to Play Tech Earnings with ETFs.]

For more stories about technology, visit our technology category.

• Technology Select Sector SPDR (NYSEArca: XLK)

• iShares Dow Jones U.S. Technology (NYSEArca: IYW)

• Vanguard Information Technology (NYSEArca: VGT)

Wholesale price  levels are on the rise, however, many other sectors within the economy are anchored. Luca Di Leo and Sarah Lynch for The Wall Street Journal report that the producer price index for finished goods rose a seasonally adjusted 1.4% on the month in January, the Labor Department said Thursday, after increasing an upwardly revised 0.4% in December. Aside from food and energy prices, few signs of inflation exist in the economy, giving the Fed more reason to keep interest rates low.

Leading indicators rose 0.3% in January, which signals that the economy should continue to grow, at least through spring. Tali Arbel for Associated Press reports that the leading indicators gauge is designed to forecast economic activity in the next three to six months.

Wal-Mart (NYSE: WMT) earnings are showing a higher quarterly profit amid mixed reports at retail stores that fell short of Wall Street’s expectations. Reuters reports that profit for the fourth quarter that ended Jan. 31 rose to $4.63 billion, or $1.21 a share. iShares Dow Jones U.S. Consumer Services (NYSEArca: IYC) is flat today; Wal-Mart is 8.7%.

Microsoft (NASDAQ: MSFT) won unconditional European Union approval on Thursday for its planned search deal with Yahoo (NASDAQ: YHOO) to challenge market leader Google (NASDAQ: GOOG), says Foo Yun Chee for Reuters. Microsoft’s Bing will become the search engine for both, while Yahoo focuses on attracting big advertisers. [For more stories about technology, visit our technology category.]

• Technology Select Sector SPDR (NYSEArca: XLK): Google is 6.5%; Microsoft is 10.3%

Gold prices are slipping as weak U.S. jobs data takes away the possibility of an interest rate hike at the Federal level. Matt Whittaker for The Wall Street Journal reports that in recent trading, April gold was down $1.10, or 0.1%, at $1,119 an ounce on the Comex division of the New York Mercantile Exchange. [For more stories about commodity ETFs, visit our commodity category.]

• SPDR Gold Shares (NYSEArca GLD)

U.K. bluetooth specialist CSR PLC remains bullish on prospects for the wireless technology market; however, the strength of the economic recovery still remains a factor. [Where Tech ETFs Are Getting Their Power.]

Chief Executive Van Beurden of CSR expects a 15% to 30% growth in the connectivity market in the next three years. Van Beurden also adds that, along with connectivity, “location and audio platforms will show significant growth by value this year and beyond.”

Nokia Corp. (NYSE: NOK), the world’s largest handset maker, and German chip maker Infineon Technologies both posted better-than-expected results last month, report Elliott Ball and Kaveri Niththyananthan for The Wall Street Journal.

CSR has a broad range of customers including Nokia Corp., Hewlett-Packard Co. (NYSE: HPQ), Sony Corp. (NYSE: SNE), Dell Inc. (NASDAQ: DELL), Microsoft Corp. (NASDAQ: MSFT) and Sharp Corp.

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

• Technology Select Sector SPDR (NYSEArca: XLK)
• iShares Dow Jones U.S. Technology (NYSEArca: IYW)
• PowerShares Dynamic Technology (NYSEArca: PTF)
• First Trust Technology AlphaDEX (NYSEArca: FXL)
• iShares Goldman Sachs Software Index (NYSEArca: IGV)

Max Chen contributed to this article.

ETFs are mutual funds that trade on stock exchanges, just as stocks do. Most are index funds, although there are a growing number of actively managed ETFs on the market. [How to pick apart an ETF.]

John Waggoner for USA Today has a rundown on some of the best benefits of ETFs and different ways to incorporate them into your portfolio.

• Hedge Inflation: The principal value of Treasury Inflation- Protected Securities rises with changes in the consumer price index, so check out iShares TIPS Bond ETF (NYSEArca: TIP) or PIMCO Broad U.S. TIPS (NYSEArca: TIPZ). Another option is to take some of the assets from your portfolio and allot them to iShares COMEX Gold (NYSEArca: IAU) to hedge inflationary fears. [How TIPS work.]
• Tilt: Tilt involves bringing up the aggressiveness of your portfolio by upping your exposure to a favorite sector. Look for areas that are up above their long-term trend lines (200-day moving average). [How to follow trends.]
• Income Seekers: There are plenty of dividend ETFs to select from, such as Vanguard Dividend Appreciation Index (NYSEArca: VIG). This way you get the upside of the dividend payers and less of the downside of the companies whose dividends are dwindling. [Why dividends are good for portfolios.]
• Basic: By investing in a total stock market fund, you are getting a large sampling of U.S. stocks. Vanguard Total Stock Market (NYSEArca: VTI) is an option if you’re the “set it and forget it” type.

For more stories about ETFs, visit our ETF 101 category.

This year looks like a good year for more merger & acquisition transactions and corporations inch their way back to fiscal health. Investors may also try and weed out weaker companies in their portfolios and switch to companies with better fundamentals. However, if the economy doesn’t improve as quickly as people would expect, stock prices may take a dip. Have your strategy at the ready if that happens. The reduction in monetary and fiscal programs around the world will also dampen the stock market’s forward momentum. [How to follow trends.]

Between Jan. 15 and Jan. 22, all sectors within the broader S&P 500 index showed negative returns, writes Frank Holmes for U.S. Global Investors. U.S. Global Investors is one of the best-known gold managers in the world (for full disclosure, I’m a board member).

Performers.

• The retail food group showed the strongest gains,  jumping 5.4% for the week.
• Airliners were the second-best performers, up 3.6%. Airliners are seeing lower capacity, route optimization and increased passengers. [The key to airline's success.]
• Regional banks also outperformed, increasing 1.1%. The administration put new regulatory action on large banks, which has turned some investors toward regional banks. [Why regional banks could come out ahead.]

Laggards.

• Aluminum, diversified metals & mining and steel groups dropped 14.3%, 11.9% and 9.9%, respectively. This may mostly be a response to China’s slowing down its economic growth.
• Health care facilities group lost 15.5%. The health care bill has lost momentum after a Republican won a Senate seat – hospitals would have more business if more people had health insurance. [Health care's prospects.]
• Diversified financial services group fell 8.7%. Large banks were sold off after President Barack Obama’s proposed new regulations.

As the economy changes and grows in the coming year, there are plenty of domestic-focused ETFs to watch:

• S&P 500 SPDRs (NYSEArca: SPY)
• Health Care Select Sector (NYSEArca: XLV)
• SPDR S&P International Telecommunications Sector (NYSEArca: IST)
• Consumer Staples Select Sector SPDR (NYSEArca: XLP)
• Consumer Discretionary Select Sector SPDR (NYSEArca: XLY)
• Select Sector SPDR Utilities (NYSEArca: XLU)
• Industrial Select Sector SPDR (NYSEArca: XLI)
• Technology Select Sector SPDR (NYSEArca: XLK)
• Energy Select Sector SPDR (NYSEArca: XLE)
• Financial Select Sector SPDR (NYSEArca: XLF)
• SPDR Select Sector Fund- Basic Industries (NYSEArca: XLB)

For more information on the S&P 500, visit our S&P 500 category.

For full disclosure, Tom Lydon is a board member of U.S. Global Investors.

Max Chen contributed to this article.

That gadget is rumored to be the iSlate, a 10- or-11-inch touchscreen tablet computer. [How consumer spending is helping tech ETFs.] Just as the iPhone and the iTunes App Store created new business opportunities for game and mobile application developers, newspaper and magazine publishers are hoping that the iSlate will similarly transform their beleaguered industry, says Brad Spirrison for appolicious.

Texas Instruments (NYSE: TXN) also announced earnings, saying that its fourth-quarter profit soared as factories used more of its chips. The chipmaker also noted that those factories are seeing lower inventory, which could keep demand strong this quarter.

Next up in earnings? Yahoo (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT). Can they top Apple’s results?

For more stories about technology, visit our technology category.

• Technology Select Sector SPDR (NYSEArca: XLK): Apple 8.3% of holdings; Microsoft is 10.6%

• iShares Dow Jones U.S. Technology (NYSEArca: IYW): Apple 9.4% of holdings; Microsoft is 12.4%; Texas Instruments is 1.9%

• First Trust NASDAQ-100 Tech (NASDAQ: QTEC): Apple is 2.8%; Microsoft is 3%

North America forecast set to have the highest rate of personal computers per person in 2010, says the Economist Intelligence Unit’s forecasts. So far, in the United States and Canada the ratio is about one per person, according to the Economist. [6 tech companies to watch in 2010.]

Globally, PC penetration will continue to rise closer to one computer for every three people. Western Europeans have nearly 70 PCs per 100 people. But fewer than one-fifth of people in Asia or Australasia are forecast to own a PC in 2010. Will the gap close once China ups its information technology spending next year? [How China and its demand affects markets and ETFs.]

As notebooks get slimmer and laptops become more advanced, it could spur sales. Cheaper computers could translate into a sales increase of as much as 8% next year. [Holiday shopping season already indicates an uptick in technology sales.]

For more stories about technology, visit our technology category.

• iShares Goldman Sachs Software Index (NYSEArca: IGM): up 63.4% year-to-date

• Technology Select Sector SPDR (NYSEArca: XLK): up 51.5% year-to-date

• iShares Dow Jones U.S. Technology (NYSEArca: IYW): up 64.7% year-to-date

This year’s markets were topped by emerging markets with the MSCI-EAFE up around 80.2% ending Nov. 30, writes Stacy Schultz for Financial Planning. John Gabriel, ETF analyst at Morningstar, attributes the high growth in emerging economies to a growing middle class, higher domestic demand and decoupling from Western countries. [More on emerging markets.]

• Shares MSCI Emerging Markets (NYSEArca: EEM): up 67.5% year-to-date

Commodities also saw a good spike on demand from a burgeoning middle class in emerging countries. Some high-performing commodities this year can be seen in gold and coal ETFs. [More on commodities.]

• SPDR Gold Shares (NYSEArca: GLD): up 24.2% year-to-date

• Market Vectors Coal ETF (NYSEArca: KOL): up 143.8% year-to-date

The top sector was technology. U.S. investors liked the balance sheets of giant technology corporations and the sector saw good performance and comparable inflows throughout the year. [More on the technology sector.]

• Technology Select SPDR (NYSEArca: XLK): up 51.5% year-to-date

The second best sector was consumer discretionary, a good indicator for investor confidence in an economic recovery. [More on retail.]

• Vanguard Consumer Discretionary (NYSEArca: VCR): up 48.4% year-to-date

Fixed-income ETFs benefited from the record inflows into securities. Investors wary of long-term Treasuries and interest rate risks choose to invest in short-term bonds and Treasury inflation-protected securities (TIPs). Dan Dolan, director of wealth management strategies at Select Sector SPDRs, warns that inflows into bond ETFs could come to a halt as yields dry up. Those investors may then turn to equities instead. [More on bond ETFs.]

• iShares Lehman 1-3 Year Treasury Bond Fund ETF (NYSEArca: SHY): up 0.4% year-to-date; yield is 2.3%

For full disclosure, Tom Lydon’s clients own shares of SHY, TIP, GLD, EEM and XLK.

Max Chen contributed to this article.