Tech Funds Rebound on Earnings Surprises

Investors last week shifted money from money market funds and U.S. Treasuries to technology stocks as some companies' fourth-quarter earnings beat expectations.

The average technology fund we track gained 2.5% in the five trading days ending Feb. 5, excluding inverse funds that sell short technology and Internet stocks.

Amazon.com(AMZN Quote), which surged 26.4% in the five trading days, had its best holiday season ever. In the latest quarter, the company increased net income by 8.7% to $225 million from a year earlier on $6.7 billion in sales, up 18%.

Adding to its sales of digital music and videos, Amazon.com has expanded its offerings to include a library of more than 600 casual games at a sub-$10 price point. The company also will begin collecting payment-processing fees on its Amazon Flexible Payments Service in June.

At 34.4% of assets, Amazon.com is the largest holding of Internet HOLDRs Trust(HHH Quote), the best-performing technology fund, gaining 11.7% last week. Yahoo!(YHOO Quote), the fund's second-biggest holding, rose 15.1% after it announced it was shutting its "Briefcase" storage service. eBay(EBAY Quote), up 7.8% for the period, integrated its payment-processing system with Moneybookers USA.

Ultra Semiconductor ProShares(USD Quote), the second-best-performing technology mutual fund, up 11.67% on 200% leverage, and Semiconductor UltraSector ProFund(SMPIX Quote), the sixth-best performer, up 10.49% on 150% leverage, track stocks in the Dow Jones U.S. Semiconductor Index.

Standouts among the holdings include Micron Technology(MU Quote), up 14%; Nvidia(NVDA Quote), up 13%; and Texas Instruments(TXN Quote), up 12.6%. Judicial proceedings in Rambus'(RMBS Quote) patent case were halted as the claims were deemed to be "unenforceable" against Micron.