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]
Semiconductor HOLDRS
