Tech Funds: Best and Worst for the Week

The average technology fund gained 5.1% in the five days through yesterday on optimism of a rebound in earnings and the economy. But that was before Microsoft ( MSFT) plunged as much as 11% today after reporting a 29% decline in profit.

Microsoft was hit with a double whammy in the second quarter. As the economy shrank, demand for Web site advertising weakened and the price of banner ads slipped. Also, cash-strapped consumers and businesses held off purchases of new PCs in advance of a new version of the Windows operating system slated for October delivery.

The best-performing fund, Direxion Daily Technology Bull 3X Shares ( TYH), returned 15% in the five trading days under review. The fund is 300% leveraged to the daily performance of the Russell 1000 Technology Index whose key members include Microsoft, International Business Machines ( IBM), up 4.6%; Apple ( AAPL), up 7%; and Cisco Systems ( CSCO) up 8.8%.

IBM is launching a secured, Web-based file-backup service throughout Europe called Vaulten. And Apple is reluctantly benefiting from a rival device maker, as Palm ( PALM) updated its Palm Pre software to allow downloading of songs from Apple's iTunes.

The second-best performing fund, Ultra Semiconductor ProShares ( USD), 200% leveraged to stocks in the Dow Jones U.S. Semiconductor Index, jumped 12%. The largest percentage gainers of this group include pops of 27% in Cohu ( COHU), 25% in DSP Group ( DSPG) and 15% in MEMC Electronic Materials ( WFR). All three of those companies beat earnings expectations this week.

Best-Performing Technology Funds for the Week Ending July 23
Fund (Ticker) Rating Fund Type Total Ret'n
1 Wk
Direxion Daily Technology Bull 3X Shares (TYH) U ETF 15.1%
ProShares Ultra Semiconductors (USD) E ETF 11.5%
Rydex 2X S&P Select Sector Technology ETF (RTG) D- ETF 10.8%
ProShares Ultra Technology (ROM) D+ ETF 9.8%
ProFunds Telecommunications UltraSector ProFund (TCPIX) E- Open-End 9.4%
B2B Internet HOLDRs Trust (BHH) D- ETF 9.4%
ProFunds Semiconductor UltraSector ProFund (SMPIX) E- Open-End 8.9%
ProShares Ultra Telecommunications (LTL) E ETF 8.8%
ProFunds Internet UltraSector ProFund (INPIX) D Open-End 8.5%
Internet HOLDRs Trust (HHH) C ETF 8.5%
Source: Bloomberg and Ratings

The worst-performing technology funds this week all short the sector with 200% negative leverage. The largest declines were minus 13% in Rydex Inverse 2X S&P Select Sector Technology ETF ( RTW), minus 11% in ProShares UltraShort Semiconductors ( SSG), minus 9.7% in ProShares UltraShort Telecommunications ( TLL) and minus 9.3% in ProShares UltraShort Technology ( REW).

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