As the Dow lost 4.40% and the S&P 500 slipped 4.85% this week, the technology-heavy Nasdaq-100 index fared worse, tumbling 7.32% in the four trading days ending Thursday. Technology funds, excluding inverse funds, also shed the same amount on average. So far this year, the group has plummeted 19.33%.

The economic picture is dim. Challenger, Gray & Christmas reported that August firings rose 12% to 88,736 compared with 12 months earlier, with job losses expected to continue through the year. More than 3.4 million Americans collecting unemployment benefits are more interested in buying the basics -- food, rent and gasoline -- than the latest computer upgrade or flat-screen TV.

Semiconductor funds, the most economically sensitive of the technology funds, crashed, with the

Ultra Semiconductor ProShares

(USD) - Get Report

, leveraged 200% to the Dow Jones U.S. Semiconductor Index, losing a fifth of its value, or 20.64%.

The second-worst performer,

ProFunds Semiconductor UltraSector ProFund

(SMPIX) - Get Report

, plunged 17.34%, dragged down by its 150% leverage to the same index. Index members leading the way include

MEMC Electronic Materials

(WFR)

, down 20.40%;

Marvell Technology Group

(MRVL) - Get Report

, with a loss of 19.11%;

Silicon Image

(SIMG)

, minus 17.25%; and

ON Semiconductor

(ONNN)

, with a decline of 16.17%. Another holding,

National Semiconductor

(NSM)

sank 11.02%, hurt by lower earnings caused by saturated and slowing demand for mobile-phone handset chips.

The Dow Jones U.S. Technology Index is tracked by the

Ultra Technology ProShares

(ROM) - Get Report

, at 200% leverage, and by the

ProFunds Technology UltraSector ProFund

(TEPIX) - Get Report

, at 150% leverage, resulting in losses of 15.79% and 12.66%, respectively. Holdings of

Ciena

(CIEN) - Get Report

nosedived 26.67%, as the company warned that telecom firms are delaying new orders due to economic uncertainty. Likewise,

Corning

(GLW) - Get Report

shares shattered 20.08% on a less-positive outlook for LCD TV screen glass.

Dell

(DELL) - Get Report

dropped 19.24% as the company pondered a dramatic change in strategy, potentially selling off worldwide manufacturing plants to save as much as $3 billion in labor and related costs.

Three funds landed double-digit returns by shorting technology stocks utilizing 200% leverage. The best-performing fund this week is the

UltraShort Semiconductor ProShares

(SSG) - Get Report

, which skyrocketed 26.37% in the four trading days ending Thursday.

Tracking the opposite of the Dow Jones U.S. Technology Index, the

UltraShort Technology ProShares

(REW) - Get Report

spiked 18.55%. Similarly, the

Rydex Inverse 2X S&P Select Sector Technology ETF

(RTW) - Get Report

popped 16.24%.

On top of the Bush administration dismissing thoughts of a second round of stimulus packages and the U.S. unemployment rate jumping to a five-year high of 6.1% in the eighth consecutive month of declining non-farm payrolls, 6.41% of all U.S. mortgages are now overdue on their payments, the worst reading on record.

If companies pull back on technology budgets and cash-strapped consumers forgo the latest round of gadgets in favor of saving their home, this may not be a good time to buy technology sector funds.

Once we get past the election in November and the capitulation of the National Bureau of Economic Research, admitting that we have been in a recession for several months, we can then start looking for buying opportunities near the bottom.

For an explanation of our ratings,

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.

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.