Technology exchange traded funds are once again receiving a boost from Apple (NasdaqGS: AAPL) shares, which broke through $500 on Monday.
The technology sector represents innovation and economic growth for investors, and has been able to outpace the S&P 500 in 2012. As the momentum continues, leading tech company Apple has investors focused on the sector aggressively.
Safety sectors such as utilities and consumer staples are lagging in 2012, with aggressive plays like financials and technology back in investor favor. But is the tech sector overbought?
Apple has managed to outperform the broad market and has given the sector renewed interest. The outstanding fourth quarter earnings and success of the iPhone and iPad have taken the spotlight. Share prices of Apple went from $420 to $450 overnight on earnings, reports David Gillie for The Street. [Nasdaq-100 ETF Breakout Hampered by Google]
“Tech firms had come out of this recession enjoying double-digit growth in technology investments from corporations. And indeed, there are still reasons to be confident about longer-term trends favoring tech firms,” says analyst Robert Goldsborough for Morningstar. [ETF Chart of the Day: Technology]
“One dynamic that has been benefiting large tech players has been the strong demand growth for smartphones, both in the developed world and in emerging markets, driven by better products and improved mobile Internet applications. Apple is the clear leader in the smartphone business, and other players are expected to benefit,” Goldsborough wrote. [Technology ETFs Power Stock Rally]
In 2012, technology spending is set to rise 6%, with below average gains in software, hardware and services, reports The Economist. Thanks to Apple’s iPad, the tablet-computer market will grow from virtually nothing in 2009 to $35 billion in 2012, according to JPMorgan. [Nasdaq-100 ETF at Highest Level Since Internet Bubble]
Government has a large in-direct impact upon tech spending, so the austerity measures in Europe and future Eurozone uncertainty will affect future performance and pricing.
Sector ETFs for technology include:
- SPDR Select Sector Technology ETF (NYSEArca: XLK)
- PowerShares QQQ (NasdaqGM: QQQ)
- Vanguard Information Technology ETF (NYSEArca: VGT)
- First Trust Cloud Computing ETF (NYSEArca: SKYY)
- Market Vectors Semiconductor ETF (NYSEArca: SMH)
- iShares Dow Jones U.S. Technology Index fund (NYSEArca: IYW)
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own AAPL.