Exchange traded funds that invest in semiconductor and chip stocks lost more than 3% in Tuesday’s mixed overall market due to weakness in top holdings Novellus (NasdaqGS: NVLS), Texas Instruments (NYSE: TXN), Applied Materials (NasdaqGS: AMAT) and Intel (NasdaqGS: INTC).
The chip sector fell sharply Tuesday after Microchip Technology (NasdaqGS: MCHP) cut its profit outlook.
The company cited several reasons for the warning, including an “inventory correction” after the Japan earthquake and broad-based weak demand across a number of key segments, said analysts at Collins Stewart in a note Tuesday.
Microchip Technology “anticipates the weak demand trends that it has seen will also broadly impact the semiconductor industry in the June/September quarter,” they wrote. “Microchip indicated that it saw weak demand trends across all major geographies including U.S., Europe and China.”
Semiconductor HOLDRS (AMEX: SMH) and SPDR S&P Semiconductor ETF (NYSEArca: XSD) fell more than 3% on Tuesday. [ETF Spotlight: Semiconductors]
Conversely, real estate ETFs were solid performers Tuesday as investors searching for yield and income moved into the sector. SPDR Dow Jones REIT ETF (NYSEArca: RWR) gained over 1%.
However, sector ETFs have moved in lock-step with the overall U.S. market the past month with sentiment driven by macroeconomic factors such as the European credit crisis and the U.S. debt ceiling. [Risk On, Risk Off — Sector ETF Correlations Spike]
ETFs that bet against international stocks have seen a pickup in trading activity lately on the credit turmoil. [ETF Chart of the Day: Emerging Markets]
In commodities markets, gold and silver ETFs traded higher. SPDR Gold Shares (NYSEArca: GLD) added 0.6% while U.S.Oil Fund (NYSEArca: USO) climbed nearly 2% on Tuesday. [Gold ETFs Near Record High as Debt Crisis Worsens]
In ETF industry news, Barclays has listed a new volatility-linked exchange traded note this week that replaces a previous version that was automatically redeemed after falling below a trigger threshold. [Barclays Launches Replacement to Shuttered Volatility ETN]
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.