Widely followed technology exchange traded funds (ETFs) such as the Technology Select Sector SPDR (NYSEArca: XLK) and broad market ETFs like the PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100 Index, have recently been in rally mode and some market observers do not see the party ending in the near-term.
Recent ebullience towards tech ETFs is represents a rapid reversal of fortune. Just a few weeks ago, investors were worried about the impact Brexit could have on technology, the S&P 500’s largest sector allocation.
Speculation that Great Britain’s decision to depart the European Union could weigh on technology stocks comes just a few weeks after chip stocks and ETFs started showing signs of leadership.
Semiconductor stocks and ETFs have recently been durable performers as semiconductor stocks are rebounding to steady the broader technology sector, but that does not mean the gains are over for this suddenly hot group.
“This quarter, Amazon’s earnings beat expectations by a long shot. Facebook’s earnings beat analysts’ expectations, as did Microsoft’s and Apple’s,” reports CNBC. “Another strategist, Nick Colas of Convergex, says he still generally sees quite a bit of interest from clients in the tech space, and believes the group is a good place to be for the back half of the year.”[related_stories]
Of course, QQQ will need help from Apple, Microsoft and the so-called FANG stocks – Facebook (NasdaqGS: FB), Amazon (NasdaqGS: AMZN), Netflix (NasdaqGS: NFLX) and Google (GOOGL) to bounce back because the traditional Nasdaq-100 is heavily allocated to those names.
However, old guard tech names that pay dividends such as Microsoft (NasdaqGS: MSFT) and Cisco Systems (NasdaqGS: CSCO) are helping drive the sector higher this year.
Traditionally, tech companies have not considered paying back their investors. Instead, many firms opted to reinvest cash back into the company or buy back stocks.
However, times are changing, and the technology sector of the S&P 500 is now among the top dividend issuers. Technology companies began to compensate shareholders during the financial crisis, and the habit stuck.
For more news and strategy on the Technology market, visit our Technology category.
Technology Select Sector SPDR
Tom Lydon’s clients own shares of QQQ.