FBThe technology sector remains the best-performing group in the S&P 500 this year, but the group has recently pulled back, albeit in modest fashion.
For example, the Technology Select Sector SPDR (NYSEArca: XLK). XLK, the largest technology exchange traded fund by assets, is down more than 1% over the past week.
The PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100 Index, is lower by 1.5% over that period. However, there are multiple reasons for investors to not panic, including historical data suggesting tech stocks are entering a period of seasonal strength.
XLK tries to reflect the performance of the Technology Select Sector Index, which is comprised of technology and telecom sector of the S&P 500. The ETF includes companies from technology hardware, storage, and peripherals; software; diversified telecommunication services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; and wireless telecommunication services. Top holdings include Apple (NasdaqGS: AAPL), Microsoft (NasdaqGS: MSFT) and Facebook (NasdaqGS: FB).
“Despite the recent tech headwinds, the sector has been outstanding in 2017. QQQ is now testing its footing atop its 80-day moving average — a trendline that coincides with a round 20% year-to-date gain, and contained the fund’s late June/early July swoon. Meanwhile, the XLK is also up roughly 20% year-to-date, and could find support atop its ascending 10- and 20-week moving averages,” according to Schaeffer’s Investment Research.