Tech ETFs to Skip If You're Bearish Like Cisco

A cautious outlook from the technology sector's networking-equipment giant and industry bellwether didn't assuage investors about the economic future, sending tech stocks and related exchange traded funds (ETFs) downward. It's a turn of events for a sector that contributed to much of the growth in the first half of the year.

Chief Executive John Chambers of Cisco Systems (Nasdaq: CSCO  ) commented on "mixed signals" and an "unusual uncertainty" after first-quarter sales were lower-than-expected, reports David Benoit for The Wall Street Journal. [Semiconductor ETFs Facing Choppy Waters.]

This additional sign of the tech sector's lack of strength as compared to earlier estimates depressed the Nasdaq this week -- it's down 4.5% in the last five trading days. Cisco opened down 11% on Thursday after two analysts, BMO Capital and Oppenheimer, downgraded the firm's outlook on Chambers' remarks. The stock has lost 20% in the last three months.

The tech sector is suffering from weak personal-computer orders, and many analyst firms have already downgraded the entire semiconductor sector as a result.

The decline in demand for personal-computer components increased investor anxiety over sales numbers of chip-maker Intel Corp. (Nasdaq: INTC  ) , writes David Benoit for AllThingsD. Some analysts are noting the poor PC-related orders, along with growing inventories. [6 Reasons to Consider Technology ETFs.]

Still, some analysts believe that Cisco and other tech companies driven by consumer demand for mobile data will provide some growth in an economic environment that may be stagnating or even contracting.

In one bright spot, a forecast by a data expert says that sales of electronics and appliances in the United States in September and October will be up 5% from a year ago, according to BusinessWeek. Is it enough to save tech ETFs?

For more information on the tech sector, visit our technology category. According to the ETF Analyzer, there are at least 21 different ways to play the tech sector domestically and internationally, including these six:

  • iShares Dow Jones U.S. Technology (NYSE: IYW  ) : CSCO is 7.3%
  • Internet Architecture HOLDRS (NYSE: IAH  ) : CSCO is 12.5%
  • iShares Goldman Sachs Networking Index (NYSE: IGN  ) : CSCO is 8.9%
  • Semiconductor HOLDRS (NYSE: SMH  ) : INTC is 22%
  • iShares Goldman Sachs Semiconductor Index (NYSE: IGW  ) : INTC is 8.3%
  • iShares Goldman Sachs Technology Index (NYSE: IGM  ) : INTC is 5.4%

Max Chen contributed to this article.

More from ETFTrends:

Intel is a Motley Fool Inside Value selection. The Fool owns shares of and has written puts on Intel. Motley Fool Options has recommended buying calls on Intel. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1271178, ~/Articles/ArticleHandler.aspx, 7/29/2014 3:16:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement