Tech Sector's Wrecked Week

On Wednesday, the Commerce Department released the bad news that U.S. durable goods orders, excluding transportation, fell 0.1% instead of rising 1.8% as predicted. It was the second-consecutive monthly decline in this business-spending barometer.

As a result, it was a tough week for the technology sector -- although a few tech funds did manage to survive the week unscathed.

If businesses continue to cut back on spending, delaying the purchase of new equipment, the Business Cycle Dating Committee of the National Bureau of Economic Research may look back at this period and declare it the beginning of a recession.

Beyond the patent lawsuit at Vonage Holdings VG and accounting problem at Dell DELL, technology companies tend to be sensitive to the mood of the overall economy.

The Fed is on the lookout for spillover from the real estate recession. One such result could be that consumers will have to pass on the latest high-tech gadget as their variable rate mortgage payment skyrockets.

For the five trading days ending Thursday, March 29, the worst-performing technology fund was the Ultra Semiconductors ProSharesUSD. By doubling up its bet on the stocks of the Dow Jones U.S. Semiconductor Index, this exchange-traded fund lost 4.45% of its chips.

The second-worst performer, SMPIXProFunds Semiconductor UltraSector ProFund, (SMPIX) lost 3.18% with its 150% exposure to the same index. The top four holdings make up more than 36% of the index, with Intel INTC slipping 0.37%, Texas Instruments TXN sliding 2.75%, Applied Materials AMAT off 1.65% and Broadcom BRCM shedding 3.30% of its value.

Another member of the index, RF Micro Devices RFMD, steered analysts toward lower estimates of its fiscal first quarter ending in June.

This drove the stock 10.24% lower for the period under review. Also, Marvell Technology Group MRVL lost 7.25% with the delay of its annual report in conjunction with a six-year restatement of financials due to misdated stock options.

Unlike the two worst performers, the FELTXFidelity Advisor Electronics Fund (FELTX) managed to lose 3.01% without the use of leverage. The largest hit came from Jabil Circuit JBL, whacked for 14.2%.

Rolling disclosures of charges exceeding $54.3 million from stock option compensation, $250 million in restructuring costs and the expected restatements of the 2003, 2004 and 2005 annual reports weigh heavily on the stock.

Worst-Performing Technology, Internet and Telecom Funds
Fund	Ticker	Rating	Fund Type	One-Week Total Return
Ultra Semiconductors ProShares	USD	U	ETF	-4.45%
ProFunds Semiconductor UltraSector ProFund	SMPIX	E-	Open-End	-3.18%
Fidelity Advisor Electronics Fund	FELAX	E-	Open-End	-3.01%
SPDR S&P Semiconductor ETF	XSD	U	ETF	-3.00%
Powershares Dynamic Semiconductors Portfolio	PSI	D	ETF	-2.91%
First Trust Nasdaq-100 Technology Index Fund	QTEC	U	ETF	-2.90%
Internet Infrastructure HOLDRs Trust	IIH	D	ETF	-2.66%
Fidelity Select Electronics Portfolio	FSELX	E-	Open-End	-2.60%
Oppenheimer Emerging Technologies Fund	OETAX	E-	Open-End	-2.45%
Source: Bloomberg March 22, 2007 to March 29, 2007

Those investors bearish on the technology stocks are currently in the right place at the right time with the UltraShort Semiconductors ProShares SSG powering its way to a 5.26% total return and the UltraShort Technology ProShares REW manufacturing a 3.54% gain.

Three of the remaining five members of the B2B Internet HOLDRs Trust BHH fell this week. But since CheckFree CKFR had a good week and accounts for 68.6% of fund assets, the fund holds third place on our best-performing list.

Best Performing Technology, Internet, & Telecom Funds
Fund	Ticker	Rating	Fund Type	One-Week Total Return
UltraShort Semiconductors ProShares	SSG	U	ETF	5.26%
UltraShort Technology ProShares	REW	U	ETF	3.54%
B2B Internet HOLDRs Trust	BHH	E-	ETF	1.87%
Firsthand Technology Innovators Fund	TIFQX	E-	Open-End	1.17%
Kinetics Internet Fund	WWWFX	D	Open-End	0.52%
Internet HOLDRs Trust	HHH	E-	ETF	0.07%
The Gamco Global Telecommunications Fund	GABTX	A+	Open-End	0.04%
iShares Dow Jones US Telecom Sector Index Fund	IYZ	A	ETF	-0.16%
Telecom HOLDRs Trust	TTH	B-	ETF	-0.17%
iShares S&P Global Telecom Sector Index Fund	IXP	A+	ETF	-0.20%
Source: Bloomberg March 22, 2007 to March 29, 2007

The upside of moderate weakness in technology companies is the pressure put on the Federal Reserve not to raise interest rates. On Tuesday, the March reading of consumer confidence came in at 107.2, down from 111.2 in February. Without sustained confidence to spend hard-earned dollars, look for continued weakness in tech sector funds.