Will ETF Investors Be Saying Yahoo If Board Gets the Hook?

One of Yahoo's biggest shareholders is hopping mad, and he's taking steps that could ultimately affect some technology and internet exchange traded funds (ETFs).

Carl Icahn, a billionaire investor, is gearing up to oust Yahoo's (YHOO) board of directors for its "irresponsible" and "unconscionable" actions that led to Microsoft (MSFT) withdrawing its $47.5 billion buyout offer.

Icahn's alternate board of directors includes Dallas Mavericks owner Mark Cuban, who presumably wasn't targeted for his mad dancing skills (he was on "Dancing With the Stars," remember).

The revolt could oust Jerry Yang, who started the company with David Filo 14 years ago, reports Michael Liedtke for the Associated Press.

Yahoo's shares are up slightly in trading today, and technology ETFs are staying steady so far, as well. How they'll be affected in the long term remains to be seen:

• Morgan Stanley Technology (MTK): down 3.3% year-to-date; Yahoo is 4%
• Vanguard Information Technology (VGT): down 5.5% year-to-date;Yahoo is 1.1%
• iShares Dow Jones US Technology (IYW): down 5.6% year-to-date;Yahoo is 1.7%
• Internet HOLDRs (HHH): down 3.6% year-to-date;Yahoo is 27.1%

Sprint Dials a Loss and Telecom ETFs Sit On Hold

Sprint (S) seems to be hurting if the numbers are any indication - what could the number three wireless carrier's woes mean to the telecom exchange traded funds (ETFs)?

In short, the carrier needs more customers, reports Laura M. Holson for the New York Times. In the first quarter, they lost 1.1 million subscribers. And churn, a measure of customer turnover and an indicator of how unhappy they are, rose from 2.3% to 2.45%.

On top of all that is strong competition from Verizon (VZ) and AT&T (T).

Sprint is making efforts to turn things around. It will offer the Samsung Instinct to existing customers in June, and the phone is the company's answer to the iPhone. It's also planning simpler voice and data plans this year.

But will the company just leave telecom ETFs holding the line, or can the stronger performance of AT&T and Verizon keep them moving? AT&T announced its earnings on April 22, and they were in line with what had been forecast by Wall Street. Verizon's earnings came out on April 28, and they were also in line with expectations. The company experienced strong growth in fiber-optic services in particular.

• Telecom HOLDRs (TTH): down 10.4% year-to-date; Sprint is 3.9%; Verizon is 25.6%; AT&P is 56.9%
• iShares Dow Jones US Telecom (IYZ): down 11.4% ytd; Sprint is 7.5%; Verizon is 15%; AT&T is 23.3%
• Vanguard Telecom Services (VOX): down 10.7% ytd; Sprint is 4.3%; AT&T is 22.5%; Verizon is 20.7%

Hewlett-Packard Tying the Knot With EDS; How Will ETFs View It?

A move that will create the second-largest technology services provider could affect related exchange traded funds (ETFs).

Hewlett-Packard (HPQ) announced today that it's going to buy Electronic Data Systems Corp. (EDS) for $13.2 billion, reports Michael Liedtke for the Associated Press. IBM (IBM) dominates the technology services sector.

Hewlett-Packard expects the merger to boost profits in the fiscal year ending October 2010. Once completed, HP estimates it will have a 7% share of the market, second only to IBM's 10%.

On the downside, the merger will mean layoffs as HP wants to eliminate overlapping jobs and other expenses. HP's shares are down this morning, but will the marriage pay off in the long run?

Among the technology ETFs that could feel the effects of the merger are:

• PowerShares Dynamic Technology (PTF): down 5.5% year-to-date; HP is 2.7%; IBM is 3.1%
• iShares S&P Global Technology (IXN): down 4.8% ytd; HP 4.5%; IBM 6%
• Vanguard Information Technology (VGT): down 6% ytd; HP 5%; IBM 5.5%
• Technology Select Sector SPDR (XLK): down 6.6% ytd; HP 5.1%; IBM 5.8%

Israel Emerges As A Strong ETF Industry Leader

Tucked away in the heart of the Jewish country is Tali 25, an exchange traded fund (ETF) that is already 8 years old. It was Israel's first fund to market.

Since then, the Israel ETF industry has grown considerably, with a ratio of ETFs to mutual funds of 25%. The ratio in the U.S. is 15%, reports Sarit Menaham for Haaretz.

The most notable aspect of  the Israeli ETF market is the number of ETFs in various indexes.  In the United States and other countries, or or a few ETF providers may have exclusivity over an index. This abundance is great for local investors as it creates competition, and has providers striving to be the best.

American investors seeking to invest in this market can do so with the iShaers MSCI Israel Cap Invest Mkt Index (EIS). This ETF launched on March 28, and is up 10.1% since.

The economy is growing at 5% for the fifth consecutive year, with high-tech companies leading the way. Voice mail technology and other innovations actually have their roots in Israel, who has more listings on NASDAQ than any country aside from the United States and Canada, reports Abraham Rabinovich for The Australian News.

Socialism is a thing of the past, however, the gap between the rich and the poor is one of the deepest among developed nations. Investment in the land of one of the oldest civilizations could prove fruitful for American investors today.

HOLDRs Are Very Different From ETFs

Recently, an acquisition between two companies illustrated how HOLDRs are different from exchange traded funds (ETFs).

BEA Systems Inc. (BEAS) was acquired by Oracle Corp. (ORCL) on April 29, 2008. BEAS was deleted from the index on April 30, and $193.75 in cash was distributed on May 5, which in turn caused the Internet Infrastructure HOLDRs (IIH) to fall nearly 33%. BEA Systems had been 31.2% of the fund and was its second-largest holding.

HOLDRs, or Holding Company Depositary Receipts, are a static basket of stocks selected from a particular industry. They don't track an underlying index, but they do represent a narrow slice of a particular sector.

Their components never change, and in the case of BEA Systems and Oracle, when BEA was acquired, the stock was not (and won't be) replaced. This results in more concentration of the remaining stocks, thereby increasing the risk for an investor.

Palash R. Ghosh for Investment Advisor wrote an article detailing how these unique instruments work. It's a few years old, but it's very interesting and informative.

Financial ETFs, Markets Stumble After Buyout Deal Rumored to Be Failing

Financial stocks and exchange traded funds (ETFs) fell midday after investors became worried that Bank of America (BAC) might not complete a proposed buyout of Countrywide Financial (CFC).

A brokerage said Bank of America was either going to renegotiate the deal or walk away from it altogether, reports Jennifer Coogan for Reuters. The news kicked the market while it was already down from the failed Yahoo (YHOO)/Microsoft (MSFT) deal.

On the upside, the service sector defied expectations and grew in April, reports Burton Frierson for Reuters. It was the first time the sector grew in four months. It covers financial, airlines, hotels and restaurants and represents roughly 80% of the U.S. economy.

The market responded to the report positively, but then resumed its southward direction.

Financial ETFs were down in trading today, as well. Among them:

• Regional Bank HOLDRs (RKH): down 1.6% year-to-date; Bank of America is 9.1%
• iShares Dow Jones US Financial Services (IYG): down 4% year-to-date; Bank of America is 10.9%
• Vanguard Financials (VFH): down 2.7% year-to-date; Bank of America is 6.6%

Yahoo Shares, Tech ETFs Sink After Microsoft Rescinds Offer

Yahoo has some splainin' to do - a shareholder sell-off sent technology and internet exchange traded funds (ETFs) lower this morning.

Shares for Yahoo (YHOO) fell more than 16% midday after Microsoft (MSFT) took back its offer of $47.5 billion after months of back-and-forth, reports Michael Liedtke for the Associated Press. CEO Jerry Yang may only have a few months to convince Wall Street that refusing the takeover bid was a wise move. If he doesn't, analysts are predicting he could be replaced or forced to accept another, lower, offer.

The Internet HOLDRs (HHH) took an especially huge hit in early trading, down nearly 4%. Yahoo is the fund's largest holding, with 27.1% of the assets. The fund had been down as much as 6.8% earlier in the day, reports Tomi Kilgore for Thomson Financial.

Among the other technology ETFs trading lower today are:

• Morgan Stanley Technology (MTK): Yahoo is 4%; Microsoft is 2.7%; down 5.1% year-to-date
• Vanguard Information Technology (VGT): Microsoft is 11.3%; Yahoo is 1.1%; down 6.6% year-to-date
• iShares Dow Jones US Technology (IYW): Microsoft is 12.4%; Yahoo is 1.7%; down 7% year-to-date

Microsoft and Yahoo In Friendly Talks; Tech ETFs Watch and Wait

Technology exchange traded funds (ETFs) watched and waited while two technology giants put their dukes down and talked about being lovers, not fighters.

Talks between Microsoft (MSFT) and Yahoo (YHOO) picked up today after both parties batted around the idea of a friendlier deal. Nothing is imminent, say those in the know, and they even cautioned that nothing could come of the talks. The sticking point is the offer price: Yahoo wants a bigger offer and Microsoft hadn't wanted to ante up a penny more, although earlier this week it hinted it might raise the bid.

Yahoo shares shot up 6.9% today, while Microsoft went slightly down by 0.5%.

Some tech-related ETFs held steady at the close today:

• iShares Dow Jones U.S. Technology (IYW): down 7% year-to-date; Microsoft is 12.4%; Yahoo is 1.9%
• Technology Select Sector SPDR (XLK): down 7% year-to-date; Microsoft is 10%; Yahoo is 1.7%
• Internet HOLDRs (HHH): down 2.8% year-to-date; Yahoo is 27.1%

Global Semiconductor Sales Surge; Will ETFs Stage Turnaround?

While semiconductor exchange traded funds (ETFs) are down slightly so far today, the outlook for the sector has improved with some first-quarter numbers.

Worldwide semiconductor sales rose 3.8% in the first quarter from the same period in 2007, reports Melinda Peer for Forbes. Sales did fall, however, from the fourth quarter of 2007, down 5.1%. It's not cause for alarm, though, because the fourth quarter typically has stronger sales, according to the Semiconductor Industry Association (SIA).

Even though the U.S. economy has slowed, consumers in other countries are snapping up electronic products - especially personal computers. Sales growth in the United States for the first quarter was 2.3%. The SIA anticipates that global demand will remain strong for the rest of the year.

Watch these funds and wait until they move above their 200-day moving averages before considering leaping in:

• iShares S&P GSTI Semiconductor Index Fund (IGW), down 6.9% year-to-date
• PowerShares Dynamic Semiconductors Portfolio (PSI), down 1.7% year-to-date
• SPDR S&P Semiconductor (XSD), down 2.7% year-to-date
• Merrill Lynch Semiconductor HOLDRs (SMH), down 2.6% year-to-date

Biotech Sector And ETFs Suffer Failed Study

The biotechnology sector suffered after a Genetech Inc. (DNA) study regarding treatment of Lupus failed, letting down related exchange traded funds (ETFs).

The study of Rituxan was in the later stages, reports Wanfeng Zhou for Thomson Financial.

Genentech lost 5.8% yesterday, while Biogen Idec Inc. (BIIB) lost 4.6%.

Both companies are major components of biotechnology-related ETFs:

• Biotech HOLDRs (BBH): The fund dropped 3.1% to its lowest level since Feb. 22. Genentech is 39.7% of the fund, while Biogen is 9.4%. Year-to-date, the fund is up 0.7%.
• iShares Nasdaq Biotechnology (IBB): Lost 1.1% in trading yesterday. Biogen is 4.3% of the fund. Year to-date, the fund is down 4.1%.

Semiconductor ETFs Are A Bright Spot For Tech Sector

The technology sector and related exchange traded funds (ETFs) seems to be losing some of the steam it had gathered toward the end of 2007.

The tech-obsessed Nasdaq composite index is down 8.6% year-to-date. Technology ETFs wrapped up last year about 13% higher, but so far this year are down about 8%. One segment of the technology sector that could be worth another look is the semiconductors, says Joseph Hargett for Forbes.

The Semiconductors HOLDRs Trust (SMH), down 4.7% year-to-date, has been demonstrating an uptrend, seen in a series of higher highs and higher lows. If it keeps heading in this direction, it could attract some attention.

The sector is largely boosted by two companies in particular: Intel (INTC) and Linear Technology (LLTC). Intel posted earnings on April 15 that were in line with analyst expectations, and predicted second quarter review to be higher. Linear's shares have risen 14% year-to-date.

If sentiment toward the semiconductor sector turns bullish, other ETFs that are poised to rebound are:

• iShares S&P North American Tech Semiconductors (IGW), down 8.8% year-to-date
• PowerShares Dynamic Semiconductors (PSI), down 4.3% year-to-date
• SPDR S&P Semiconductor (XSD), down 5.6% year-to-date

Being In the Middle Better for ETFs Than Jan Brady

Among the exchange traded funds (ETFs) that focus on a particular company size and investing style, mid-cap growth seems to be leaving the others in the dust lately.

In the last three months, mid-cap growth has risen 10.2%. In the same time period, large-cap growth is up 7.2% and small-cap is up 6.2%. Gary Gordon for ETF Expert reports that one might find it tricky to locate any other size/style ETFs that are above their 200-day moving averages.

Some of these funds have been bolstered by strong performance from their top holdings:

• iShares S&P MidCap 400 Growth Index (IJK): Top holding is Intuitive Surgical, Inc. (ISRG), at 2.5%; up 2.9% in last three months. The fund is up 10.2% in the same time period.
• iShares Morningstar Mid Cap Growth (JKH): Top holding is ISRG at 1.4%; the fund is up 9.1% in the last three months.
• Vanguard MidCap Growth (VOT): up 8.9% in the last three months.
• Rydex MidCap 400 Pure Growth (RFG): Top holding at 2.1% is Encore Acquisition (EAC), which is up 50.3% in the last three months. The fund is up 9.3% in the last three months.
• PowerShares Dynamic Mid Cap Growth Portfolio (PWJ): Top holding at 3.7% is FMC Technologies Inc. (FTI), which is up 29.4% in the last three months. The fund is up 7.1% in the last three months.

Gordon says investors who believes the U.S. market is going to recover in a big way from the current mess may like a mid-cap growth fund. Since all of these are at or above their trend lines (200-day moving average), take a look and see what works best for your portfolio.

For full disclosure, some of Tom Lydon's clients own shares of IJK.

Read the disclosure, Tom Lydon is a board member of Rydex Funds.

Nasdaq, Dow and ETFs Close at Three-Month Highs

The exchange traded fund (ETF) that tracks the Nasdaq 100 hit a three-month high in trading yesterday after its 10 most-heavily weighted components moved higher. It doesn't seem like it's going to stick if the midday retreat in the markets holds, though.

The PowerShares QQQ (QQQQ) closed Thursday at their highest price since Jan. 14, reports Tomi Kilgore for Thomson Financial.

Apple (AAPL) gave the index a boost after it posted earnings that exceeded expectations at the close of trading on Wednesday. Apple is the index's most heavily-weighted component, with 10.4% of assets. Qualcomm (QCOM) is the third largest component, with 5.7% of assets. The wireless technologies company also had reported stronger than expected earnings.

For the first time since last year, the Dow Jones industrial average scooched above its trend line, the 200-day moving average. It closed at three-month highs after the dollar strengthened and oil prices fell slightly, reports CNN Money.

The DIAMONDS Trust, Series 1 (DIA) closed at their highest point since Jan. 3.

Stocks, ETFs Down on Consumer Confidence Numbers and Microsoft/Yahoo Battle

Some exchange traded funds (ETFs) headed lower this morning after consumer sentiment dropped to its lowest point in nearly 26 years. Technology ETFs weren't helped by Microsoft's disappointing earnings forecast.

The Reuters/University of Michigan consumer sentiment index read 62.6 for April, a 9.9% drop from a month ago. It's the lowest reading since the 1980s, reports Tim Paradis for the Associated Press. Consumer spending is about 70% of U.S. economic activity, so Wall Street is worried.

Microsoft (MSFT) announced earnings that were in line with expectations, but it also faced comparisons with a rosier picture one year ago. The company said that for its fourth quarter, sales would be between $15.5 billion and $15.8 billion, CNNMoney says. Analysts are predicting $15.6 billion. Investors seemed mostly unimpressed by it all, though.

The deadline for Yahoo (YHOO) to accept Microsoft's takeover offer is tomorrow. If no agreement is reached, Microsoft will consider its next step.

• iShares Dow Jones U.S. Technology (IYW): down 8% year-to-date; Microsoft is 12.4%; Yahoo is 1.9%
• Technology Select Sector SPDR (XLK): down 8.9% year-to-date; Microsoft is 10%; Yahoo is 1.7%

Apple, Amazon Come Out With Earnings Numbers; Could Tech ETFs Hop?

Two highly anticipated earnings reports came out after the market close, and the good news could lift related exchange traded funds (ETFs).

First, Amazon.com (AMZN) came out with its numbers. The web retailer says its first-quarter profit rose 29%, beating expectations on Wall Street. The numbers were helped by overseas sales, reports the Associated Press. The numbers are up 31% from one year ago.

Apple (AAPL) also blasted through expectations with its numbers, announcing earnings of $1.16 a share, reports CNBC. Analysts had been expecting $1.07 a share. The stock was trading nearly 4% higher in after-hours tradings.

This news follows Yahoo's (YHOO) positive numbers from yesterday, and Google's (GOOG) strong earnings report from last week. Microsoft (MSFT) is going to report its earnings tomorrow after the closing bell.

 

The technology sector could be something to watch tomorrow.

Amazon and Apple are major components of several ETFs, including:

• Retail HOLDRs (RTH): Amazon is 5%; up 1% year-to-date
• Internet HOLDRs (HHH): Amazon is 21.7%; down 3% year-to-date
• Technology Select Sector SPDR (XLK): Apple is 5%, down 10.5% year-to-date
• iShares Dow Jones US Technology (IYW): Apple is 6.6%, down 10.3% year-to-date

Technology ETFs Inch Up as Yahoo and Microsoft Lock Antlers

The battle between two giants continues, and technology exchange traded funds (ETFs) are enjoying the view from the sidelines.

Yahoo (YHOO) yesterday reported its first quarterly profit increase in two years. Surely this would encourage Microsoft (MSFT) to raise its $44.6 billion offer for the company, right? No dice. Microsoft CEO Steve Ballmer says he doesn't plan to raise his offer, but they still might raise it to get the board's approval, report Sara Gay Forden and Alex Armitage for Bloomberg.

Yahoo's CEO Jerry Yang, for his part, won't negotiate at the current offer.

Technology ETFs are benefiting as the two sides duke it out. They're both up more than 1% midday:

• iShares Dow Jones U.S. Technology (IYW)
  • up 1.8% midday
  • down 10.4% year-to-date
  • Microsoft is 12.4%; Yahoo is 1.9%
• Technology Select Sector SPDR (XLK)
  • up 1% midday
  • down 10.4% year-to-date
  • Microsoft is 10%; Yahoo is 1.7%

ETFs Aren't Lovin' Good Earnings Numbers from McDonalds, AT&T

Despite positive numbers from both AT&T (T) and McDonald's (MCD), the exchange traded funds (ETFs) that count them as major components seem to be unmoved by the news.

AT&T reported that its first quarter profit was up 22%, mostly because of strong wireless growth, reports Peter Svensson for the Associated Press. Its wireless division added a net 1.3 million subscribers in the quarter.

While AT&T is trading higher midday, ETFs holding the company aren't so far:

• iShares Dow Jones US Telecommunications (IYZ): AT&T is 23.3%, down 18.8% year-to-date
• iShares S&P Global Telecommunications (IXP): AT&T is 17%, down 10.3% year-to-date
• Technology Select Sector SPDR (XLK): AT&T is 9.6%, down 10% year-to-date

Meanwhile, McDonald's also reported first-quarter profit growth of 24% based on strong international sales. Between January and March, it earned 81 cents per share compared with 62 cents per share during the same period last year. Those numbers blew the forecast of 70 cents per share clear out of the water.

The PowerShares Dynamic Food and Beverage (PBJ) fund was slightly lower midday, though. McDonald's is 4.9% of the fund, which is down 1.4% year-to-date. The fast food company is also 5% of the PowerShares Dynamic Leisure & Entertainment (PEJ), which is down 6.6% year-to-date.

Earnings Show Good Signs And Help Tech and Financial ETFs

First quarter earnings reports are lifting exchange traded funds (ETFs) today.  Reports from Google (GOOG) and Citigroup (C) helped ease investors minds about corporate profits, so much so that it has sent the Dow up over 250 points in midday trading.

Google's first-quarter earnings and revenue growth topped analysts' expectations, reports Tim Pardis of Associate Press.  Their performance indicates Internet advertising remains robust.  iShares Dow Jones U.S. Technology (IYW) has 5.4% given to Google and is up over 3% in midday trading.  Technology Select Sector SPDR (XLK) holds 5% of the company and is up over 2%.  Technology related ETF, PowerShares QQQ (QQQQ) is up over 3%.

Citigroup also reported earnings with not big surprises.  The company reported a loss of $5.1 billion in the first quarter, but it was less than half of the loss from the previous quarter.  Among the financial related ETFs are the Financial Select Sector SPDR (XLF) that holds 5.9% of Citigroup and is up over 3% in midday trading.  iShares Dow Jones US Financial Services (IYG) has 7.6% of the company and is up almost 4%.

Google Gives Earnings; Will Tech ETFs Party Tomorrow?

What was with all the hand-wringing? Google's numbers finally came out after the market close, they were good and technology exchange traded funds (ETFs) liked it.

Google (GOOG) put the kibosh on rumors that its advertising business was slowing and reported that its first-quarter net income rose to $1.31 billion, reports Reuters.

iShares Dow Jones U.S. Technology (IYW) has 5.4% given to Google, and Technology Select Sector SPDR (XLK) holds 5% of the company. They're up slightly in after-hours trading, but how will it be tomorrow?

Mixed Earnings Reports Give Mixed ETF Results

Merrill Lynch (MER ) posted a first-quarter loss this morning, but so far the broker-dealers exchange traded fund (ETF) seems to be keeping quiet.

The world's largest brokerage said it would cut 3,000 jobs after more than $6.5 billion in fresh write-downs. It's the third consecutive quarterly loss, reports Joe Bel Bruno for the Associated Press. The firm's CEO went on to warn that the next few quarters could be similarly rough.

Yesterday, the Financial Select Sector SPDRs (XLF) rose for the third consecutive trading day. It's up slightly today, as well - will the winning streak continue? Merrill Lynch is 2% of the fund. Year-to-date it's down 11.3%.

The iShares Dow Jones US Broker-Dealers (IAI) is down just 0.05% midday, and year-to-date it's off by 23.8%. Merrill Lynch is 6.5% of the fund.

Pfizer (PFE) reported that is first-quarter profit fell by 18%, because of generic drug competition, says the Associated Press. The numbers were short of estimates. The company also was hurt by the loss of patent protections for drugs such as Norvasc and Zyrtec. The world's best-selling drug, Lipitor, is going to lose its patent protection in 2010. It's a key source of revenue for the company.

Pfizer is 17.6% of the Pharmaceutical HOLDRs (PPH), which are down just over 1% midday. Year-to-date, it's down 10.8%.

IBM (IBM) delivered some good news: they boasted a 26% rise in profits, surpassing expectations, according to Tim Paradis for the Associated Press.

IBM is 31.89% of the Internet Architecture HOLDRs (IAH), which is up less than 1% midday. Year-to-date, it's down 8.2%.

Tech ETFs Holding Their Breath For Google Earnings Report Tomorrow

Investors, technology exchange traded fund (ETF) investors and computer junkies alike are anticipating the first quarter earnings from Google (GOOG).

The numbers are due out tomorrow.

Wendy Tanaka for Forbes reports that the number of clicks on ads hosted by Google have deteriorated since January. Is it the sluggish economy, as some analysts claim, or is it the disappointing growth of last quarter, which disappointed many?

How will tech stocks and ETFs react? iShares Dow Jones U.S. Technology (IYW) has 5.4% given to Google, and Technology Select Sector SPDR (XLK) holds 5% of the internet company. Declining clicks and missed earnings have caused analysts to lower expectations 12 cents a share on average. Analysts surveyed by Thomson Financial estimate that Google will report first-quarter earnings of $4.52 a share.

Other tech earnings reports coming soon are Yahoo (YHOO), which expected to report earnings of 90 cents per share on April 22. Microsoft (MSFT) will give numers on April 24, and is expected to report earnings of 44 cents per share.

Intel's News Boosts Stocks, Semiconductor ETFs

Semiconductor maker Intel Corp (INTC) reported a lower quarterly net profit and revenue ahead of expectations, sending shares and semiconductor exchange traded funds (ETFs) higher in after-hours trading.

Intel is one of the bellwethers for the technology sector, reports Reuters, and the company makes up 21% of the Semiconductor HOLDRs (SMH). Year-to-date, the fund is down 11%. Intel is also 8.3% of iShares S&P North American Tech-Semiconductors (IGW), which is down 15.7% year-to-date.

If Investment Remains Solid, Infrastructure ETFs Could Gather Strength

An exchange traded fund (ETF) can be a better proxy for a sector than a single stock. It takes the guesswork right out of investing.

Diversification is another element that is added when using ETFs instead of a single stock within a portfolio. An example is the GE (GE) stock that missed its numbers by a long shot late last week. While media has been a weak performer so far this year - PowerShares Dynamic Media (PBS) is down 10.4% year-to-date - and the financials are tough, there could be other reasons to own GE. The company, after all, wears many hats.

How about infrastructure?, asks Roger Nusbaum for Seeking Alpha. The infrastructure sector can cover a wide range of things, including roads, airports, utilities, information technology and other channels of communication. Breakdowns in some of these areas can lead to major disruptions in a country, as seen when China experienced a record snowfall this winter.

Globally, billion upon billions will be spent on infrastructure over the next decade or two. It is reasonable to assume that stocks in this sector will do well, wait until these funds move back above their trend lines before diving in. Countries and regions such as South Africa, Latin America and China are making infrastructure improvements a particular focus in the coming years.

Build up your portfolio's inner strength with:

• iShares S&P Global Infrastructure Index (IGF), year-to-date down 10.1%
• SPDR FTSE/Macquarie Global Infrastructure 100 (GII), year-to-date down 5.8%

Semiconductor's Upgrade Gives ETFs a Jolt

The semiconductor sector and exchange traded funds (ETFs) got a boost early today after a brokerage upgrade.

Banc of America Securities said a modest inventory buildup in the sector has eased, leading to an upgrade. On that news, semiconductor ETFs were up by as much as 3.3% midday. Intel Corp (INTC) shares leaped nearly 4%, injecting a bit of life into all three major U.S. stock indexes.

The sector hasn't had an easy time of it this year. Beginning late last year, there was an overcapacity that slowed down chip makers and squeezed their margins. Weakened demand has hurt the sector, but it would seem that the overcapacity has been absorbed.

Semiconductor-focused ETFs include:

• iShares S&P GSTI Semiconductor Index (IGW), down 12.8% year-to-date
• PowerShares Dyname Semiconductors Portfolio (PSI), down 8.6% year-to-date
• SPDR S&P Semiconductor (XSD), down 11.4% year-to-date
• Merrill Lynch Semiconductor HOLDRs (SMH), down 8.2% year-to-date

Twists and Turns in Microsoft vs. Yahoo Benefits Tech ETFs

The Yahoo (YHOO) plot thickens, and it's sending the technology-related stocks and exchange traded funds (ETFs) higher in midday trading.

For those playing along at home, Microsoft (MSFT) is threatening a hostile takeover bid. Yahoo doesn't like the offers that have been made so far. And now, Yahoo is teaming up with Google (GOOG) in a two-week experiment to test how much more advertising Google can sell for its rival, reports Michael Liedtke for the Associated Press. If things go well, Yahoo will combine its online operations with Time Warner's AOL, which would make a cash investment in exchange for a 20% stake. Google already handles AOL's search advertising.

Yahoo would then use that cash to buy back stock and put money into shareholders' pockets. If all this fancy footwork increases the pressure for Microsoft to make a higher bid, they may launch a counterattack with News Corp., part of Rupert Murdoch's media empire.

A merger with Yahoo and Google, however, probably wouldn't get antitrust clearance, because Google and Yahoo combined would control 80% of the U.S. search market.

The back-and-forth might be confusing, but one thing is clear: the technology funds are enjoying it.

• Internet HOLDRs (HHH)
  • up 1.3% midday
  • down 4.9% year-to-date
  • Yahoo is 20.4%; Time Warner is 11.3%
• iShares Dow Jones U.S. Technology (IYW)
  • up 1.8% midday
  • down 14.2% year-to-date
  • Microsoft is 12.4%; Google is 5.4%; Yahoo is 1.9%
• Technology Select Sector SPDR (XLK)
  • up 1% midday
  • down 13.5% year-to-date
  • Microsoft is 10%; Google is 5%; Yahoo is 1.7%

Technology ETFs Don't Move Much While Microsoft Woos Yahoo

Yahoo (YHOO) is playing hard-to-get with Microsoft (MSFT), and the coyness is having mixed results in the technology exchange traded funds (ETFs).

Microsoft has given Yahoo a three-week deadline to accept its $42 billion takeover offer, but Yahoo says it can do better, reports Franklin Paul for Reuters. Yahoo stock is down 1.5% midday, while Microsoft is up slightly, 0.14% midday. If Yahoo accepts the deal, it will be the biggest takeover in the high-tech industry.

Technology ETFs have been showing mixed results in trading so far today:

• Internet HOLDRs (HHH): down 0.2% midday; down 3.6% year-to-date. Yahoo is 20.4% of assets.
• Technology Select Sector SPDR (XLK): up 1.1% midday; down 12.4% year-to-date. Microsoft is 11.3% of assets.
• iShares Dow Jones US Technology (IYW): up 0.9% midday; down 13% year-to-date. Microsoft is 11.9% of assets.

 

Worldwide Growth Can Build Up Demand for Industrial ETFs

The PowerShares FTSE RAFI Industrials Sector (PRFN) exchange traded fund (ETF) could benefit from optimism in the industrial sector down the line.

How's that? Many of the companies in this fund's top holdings have a global reach, including General Electric (GE), which is far and away the largest holding in the fund at 18%. Another holding, Caterpillar (CAT), is up 10.6% year-to-date and makes up 2.6% of the fund. United Parcel Service (UPS), which is 4.1% of the fund, has an extensive global network. Developing markets in a growth spurt help fuel the demand for the products these companies offer and help offset the damage of a U.S. slowdown, reports Don Dion for Seeking Alpha.

The fund represents a wide range of sectors, including defense and aerospace, machinery makers, transportation and software.

The fund is down 4.6% so far this year, but if the sectors that it represents continue to post gains, this ETF could stage a turnaround. A prolonged recession in the United States, however, could pinch this ETF, while a global slowdown would really hurt. If this fund moves above its trend line (200-day moving average), it could be one to keep an eye on.

Technology ETFs Bear the Weight of Oracle's Stumble

While Oracle Corp. (ORCL) gave good news that its quarterly profit had risen, other numbers weren't to investors' liking and its shares fell, taking technology exchange traded funds (ETFs) with them.

While the company reported a 16% rise in new software sales, that was at the low end of what had been expected, Reuters reports. Those sales are important, because investors look to them as an indicator of the future performance of business software makers.

In after-hours trading, Oracle's shares dropped 8.3%. Some technology ETFs that count Oracle as a major holding were down today, as well:

• iShares Dow Jones US Technology (IYW), down 1.3%, Oracle is 3.9%
• iShares S&P GSTI Software (IGV), down 2.1%, Oracle is 9.2%
• Technology Select Sector SPDR (XLK), down 1.9%, Oracle is 3.4%

Motorola to Split In Two - Technology ETFs Are Mum For Now

Motorola (MOT) announced today that it was going to split itself in two, but so far the impact on technology and networking exchange traded funds (ETFs) doesn't seem apparent.

The company's stock has fallen 45% in the last year, reports the Dealbook in the New York Times, and the breakup doesn't come as a surprise. The plan is to separate the cell phone unit from its broadband and mobility operations. With the news, shares of Motorola were up just a smidge in intraday trading.

Motorola sits in these ETFs:

• iShares Dow Jones US Technology (IYW): Motorola is 1.2%, year-to-date it's down 13%
• iShares S&P GSTI Networking (IGN): Motorola is 4.6%, year-to-date it's down 16.6%
• Vanguard Information Technology (VGT): Motorola is 1.4%, year to date it's down 12.7%

It remains to be seen if Motorola's move will be successful and help it compete against big rivals such as Nokia, Samsung and Apple. If the decision to split was the right one, these ETFs could see some benefit. However, the company isn't in the top five holdings for any of them, so any impact wouldn't be overwhelming.

If Yahoo Finds a Taker, Some ETFs Could Take Notice

Yahoo Inc. (YHOO) delivered a rosy outlook for 2009 and 2010, but will the exchange traded funds (ETFs) that count the company as a major holding buy it?

The disclosure, which was not scheduled, is seen by analysts as a sign that Yahoo hasn't been able to find another offer after Microsoft Corp.'s (MSFT), which was for $44.6 billion. The offer was 62% higher than the company's market value at that time, and Yahoo is feeling some pressure to justify turning it away.

Michael Liedtke for the Associated Press says Yahoo has been exploring possibilities with Google, News Corp's MySpace.com, and Time Warner Inc.'s AOL.

Yahoo's forecasts predict that revenue, minus advertising commissions, will rise more than 70% in the next three years to reach $8.8 billion in 2010.

If Yahoo finds a taker, some ETFs might notice the shift:

• First Trust Dow Jones Internet Index (FDN), 8.91% in Yahoo
• Internet HOLDERs (HHH), 27.1% in Yahoo
• Technology Select Sector SPDR (XLK), 10% Microsoft
• iShares Dow Jones US Technology (IYW), 11.9% Microsoft; 1.9% in Yahoo
  

Broker-Dealers and Internet ETFs Were Stars Yesterday

It was a good day for the markets overall, but two exchange traded funds (ETFs) in particular stood out head and shoulders above the rest yesterday: iShares Dow Jones US Broker-Dealers (IAI) and the Internet Infrastructure HOLDRs (IIH).

Internet Infrastructure likely benefited from strong performance from its major holdings. VeriSign Inc. (VRSN) rose 4.6%. It makes up 43.1% of the ETF. Akamai Tech. Inc. (AKAM) is 16.6% of the fund, and was up 5.8%.

Overall, it was a good day for our internets: for the first time in five sessions the sector finished higher. The Internet HOLDRs (HHH) fund was up 5.9%.

The performance of the broker dealers fund is a relief, since it's been weighed down by the Bear Stearns (BSC) fiasco. It plummeted to an all-time low on Monday before rebounding up higher on Tuesday.

Will it stick? Only time will tell. The financial sector has been full of nervous energy, but the Federal Reserve's 0.75% rate cut on Tuesday might restore some confidence. Financials are nowhere near out of the woods yet, and plenty of concern about the sector remains. Many wonder if Bear Stearns is just the first of many collapses to come.

Other financial ETFs, including the Financial Select Sector SPDR (XLF) and the iShares Dow Jones US Financial Services (IYG) both finished up more than 8% higher yesterday. We would not buy these funds for our clients until they go above their 200-day moving averages. However, if you're considering a look at these funds sooner rather than later, you can use the 50-day moving average as a gauge instead.

Boeing Orders Are Up; Transportation ETF Cleared to Take Off?

The PowerShares Aerospace & Defense (PPA) exchange traded fund (ETF) could benefit from news that Boeing (BA) shares rose Friday. Boeing is a major component in the fund at 6.8%. The company reported orders of 85 more planes this week.

The Associated Press reports that the aircraft maker's stock rose more than 2% on Friday. These gains contrast the markets' fall of Bear Stearns, which is getting bailed out by the government and J.P. Morgan Chase. Morgan Stanley upgraded Boeing shares on the news that more orders will boost stock and earnings this year.

PPA could use some help lifting off: it's down 13.1% year-to-date.

India ETFs Might Focus on the Same Country, But That's Where Similarity Ends

Two new exchange traded funds (ETFs) finally give investors the passage to India they had been looking for.

The country has been in the spotlight lately, with its 9% annual GDP growth and strong currency and a presence that demands some attention, reports  Roger Nusbaum for TheStreet.

The newest additions, the  WisdomTree India Earnings (EPI) and PowerShares India Portfolio (PIN) might represent the same market, but they're vastly different. EPI is fundamentally weighted with 150 companies while PIN is market-cap weighted, focusing on 50 companies.

EPI gives 41% to energy and materials, while PIN allocations 37% to the sectors. EPI gives less to telecom, 17%, while PIN gives 26%. PIN's heavier weighting in technology is seen as more of a bet on what India can provide to the world. Did you know that the "brains" of the iPod were invented by an Indian company, who then sold it to Apple (AAPL)?

EPI has had better past performance because of its heavier weighting in resources, but any large commodity correction will hit EPI harder then PIN, Nusbaum says. EPI focuses more on internal growth, which appears to be a better choice.

Earlier this week, iShares announced that it has filed a registration form with the Securities and Exchange Commission (SEC) for yet a third India ETF.

India will add volatility to any portfolio, and whichever fund you choose, make sure it fits in with your investment goals.

Not All the Good Ideas Are Taken With ETFs

W.P. Thatcher for Stocks For All Seasons has 10 exchange traded funds (ETFs) in mind that he'd like to see come to market.

Long gone are the days of only the plain vanilla fund, so let's see what he has to add. Among his picks are:

• More commodity ETFs. Where are ETFs for pork bellies, cocoa and lumber? Most people aren't sophisticated enough to handle futures trading, but they still need exposure to this asset class. There is the Claymore/Clear Global Timber Index (CUT), but it doesn't track futures.

• Momentum stocks ETF. I don't know how this could be done cheaply due to the constant shifts in buying and selling, but there would be HUGE demand for it.

• An ETF for distressed debt. Let retail investors be vulture investors for a day.

• Real estate ETFs for specific housing markets.  People forget that we have many housing markets.  Not everywhere is tanking.

• A collectibles ETF. This would be very hard to value, so it might have to be in something really liquid like Bordeaux futures or Old Masters.

Late last year, we drew up our own wish list of ETFs. How are things coming along so far?

• State ETFs: Yep! The first state ETF is projected to be Oklahoma's, and it's scheduled to launch in late April. The fund will be made up entirely of stocks issued by the state's publicly traded companies.
• Ireland ETF: Wouldn't it be nice to have one in time for St. Patrick's Day? That would be something worth hoisting a Guinness for. Alas, there's always next year.
• Global Wireless ETF: Nothing doing yet, and there isn't anything in registration.
• Mortgage ETF: The market will turn around someday, but this kind of fund isn't a high priority right now.
• An ETF of ETFs: We've predicted that there will be one to launch this year, but so far, there hasn't been one. Luckily, there are nine months left.
• Dry Shipping ETF: A fund like this could capitalize on increasing globalization, but it has yet to materialize.

Will The "Red Ring" Penetrate Your ETF?

 

The "Red Ring Of Death" may be glowing around Microsoft (MSFT), so is it going to penetrate the technology-oriented exchange traded funds (ETFs) as well?

More than 18 million Xbox 360's have sold since their launch in November 2005. According to various warranty supporters, 16% of these have experienced failure within 6-10 months of the warranty purchase.

Mike Smith on Yahoo! Games reports that three out of every five failures were because of the "Red Ring Of Death": a general hardware failure error associated with overheating.

Squaretrade, a company that offers warranty support to purchasers of electronic goods, says it's safe to assume a good deal of warranties went straight back to Microsoft, with failure rates certain to go up as the product within the study group gets older. The failure rate is estimated around 3%, while some gamers are predicting in the neighborhood of 30-40%.

Look if there is red ring around your ETF:

• iShares Dow Jones US Technology (IYW): Microsoft is 13.7%
• Vanguard Information Technology (VGT): holds 9.2%
• iShares S&P GTSI Technology (IGM): holds 9.33%

Market Volatility Has Unearthed Some ETF Buying Opportunities

Research firm MarketGrader compiles the indexes that underly the Spa Exchange Traded Funds (ETFs).

MarketGrader's latest fundamental research indicates that the U.S. market is largely oversold in the wake of volatility, reports ETF Express.

Buy opportunities exist in particular in the information technology and industrials sectors. MarketGrader 100, and equal-weighted fundamental index, offers investors to a basket of 100 top-rated U.S. equities according to the analysis of attractiveness of the 5,700 U.S. equities using 24 fundamental factors.

High growth characteristics at low price-to-earnings ratios are part of the grading process.

Relative to the S&P 500, the index is overweight in cyclical sectors and underweight in defensive ones, according to Neil Michael, head of quantitative strategies at Spa ETF. He says that the index is well-positioned to take advantage of any economic stimulus package and further interest rate cuts from the Federal Reserve.

Short ETFs Can Help If Handled With Care

In a down market, short exchange traded funds (ETFs) gain popularity, but they need to be used with caution and education.

ProShares UltraShort QQQ (