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Market Update

The Week in Stocks and Funds

Tech investors put on their rally caps.

The chips were up. Well, they were up for most of the week anyway. Until Juniper Networks (JNPR) felled the Nasdaq Composite with a mighty earnings warning Friday, chip stocks posted surprisingly strong gains, as investors bet on a second-half recovery for the industry. First, on Tuesday, Xilinx (XLNX) said it would meet severely diminished earnings expectations, prompting a rally in that stock. Semiconductor issues got a particularly big boost on Thursday, when the Semiconductor Industry Association rubbed its crystal ball and determined that business was about to improve for chipmakers. Then, after the close, Intel (INTC) announced that it would probably meet the low end of its revenue and earnings projections for the second quarter (gasp!). In go-go 1999 that sort of announcement probably would have cut the stock in half, but in this year of severely diminished expectations, it fueled a buying spree. For the week, the Nasdaq Composite rose 3%, to 2,215.1. The Dow Jones Industrial Average and the S&P 500 index also posted gains, though they were less dramatic. The S&P 500 rose 0.34% to 1,264.96, while the Dow fell 0.12% to 10,977.

Fund Category Returns
Friday's sell-off probably pared their gains, but for the week through Thursday, specialty-technology funds posted excellent gains, rising 7.98%. With chip stocks leading the sector higher, you might guess that semiconductor-heavy funds would have posted the strongest gains. You'd be right. Among funds posting excellent returns, Semiconductor UltraSector (SMPIX) rose 23%, Rydex Electronics (RYSIX) soared 12.9%, and Fidelity Select Electronics (FSELX) increased 12.5%. For these funds, moves of that magnitude aren't unusual, as senior fund analyst Chris Traulsen pointed out in a recent analysis on Fidelity Select Electronics.

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