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Semiconductor ETFs Expected to Shine

Stocks in this article: PSI IGW SMH

NEW YORK ( TheStreet) -- As consumer confidence strengthens, global economies grow and capital spending in corporate America increases as expected, the semiconductor industry and its exchange-traded funds are likely to reap the benefits.

According to the latest data from the Conference Board, its index of consumer confidence increased for the third month in a row to its highest level in two years. This indicates that consumers are starting to see the light at the end of the tunnel and are hopeful that the nation's economy will stabilize and show signs of growth.

As this trend continues to emerge, consumers will likely increase spending, which was recently seen in the personal computer market. According to research firm IDC, shipments of personal computers to the United States jumped by 24% in the past quarter and is expected to continue to show signs of prosperity. This jump in personal computer demand will likely benefit the semiconductor industry.

Additionally, increases in capital spending by domestic corporations are likely to add to the sectors appeal. According to the Philadelphia Federal Reserve Bank's monthly index of manufacturing, businesses are expected to increase manufacturing capital spending. Similar trends have been seen in New York banks, where the New York capital expenditure index jumped to a 33.33 last month, rising to the highest level in over 30 months.

This trend is likely to continue, as the Institute for Supply Chain Management index rose to its highest level August 2004 for a sixth-straight month of expansion. In fact, Texas Instruments (TXN), the second-largest U.S. chipmaker, recently announced that it will spend nearly $1 billion to expand operations to keep up with increased demand.

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