Another Broad, Sharp Break

The tradable tech funds again led the market lower Thursday with the Internet HOLDR and component Yahoo following through after high-volume, gap-down moves in the prior session. The financial and cyclical funds also weakened.

The breadth of the damage was clear in the broad index shares. The Diamonds (DIA | Quote | Chart | News | PowerRating), which track the Dow Jones industrial average, declined 3.8%. The S&P Depository Receipts (QQQ | Quote | Chart | News | PowerRating) fell 2.4%. The Nasdaq 100 Tracking Stock (QQQ | Quote | Chart | News | PowerRating) shed 2.5%.

The Internet HOLDR (HHH | Quote | Chart | News | PowerRating) dived 8.1%, the day's sharpest loss among the exchange-traded funds. The HOLDR again shared the fate of Yahoo (YHOO | Quote | Chart | News | PowerRating), which dropped 13.4%.

The Dow Jones Internet Index iShares (IYV | Quote | Chart | News | PowerRating) slid 8.0%, the Internet Infrastructure HOLDR (IIH | Quote | Chart | News | PowerRating) 7.7%, the Biotech HOLDR (BBH | Quote | Chart | News | PowerRating) 5.3%, the B2B Internet HOLDR (BHH | Quote | Chart | News | PowerRating) 5.2%.

The Cyclical-Transportation SPDR (XLY | Quote | Chart | News | PowerRating) gapped down 7.1%. The index shares took a heavy hit from Home Depot (HD | Quote | Chart | News | PowerRating), which sold off following an earings earning. Home Depot has the second largest weighting the Cyclical-Transportation Spyder (after WalMart).

Financial stocks tumbled on Middle East violence. The Financial SPDR (XLF | Quote | Chart | News | PowerRating) sank 5.8%, the Banking HOLDR (RKH | Quote | Chart | News | PowerRating) 5.1%, the Dow Jones Financial iShares (IYF | Quote | Chart | News | PowerRating) 5.0%. A related rally in energy prices lifted energy stocks and the Energy SPDR (XLE | Quote | Chart | News | PowerRating), which added 1.4%. It was the only full-percentage point gain among the U.S.-focused tradable funds.

Some money flowed into defensive stocks, lifting the Consumer Staples SPDR (XLP | Quote | Chart | News | PowerRating) 0.6% and the Pharmaceutical HOLDR (PPH | Quote | Chart | News | PowerRating) 0.5%.

Exchange-traded funds combine traits of stocks and mutual funds. Like mutual funds, an ETF represents diversified ownership in a number of different stocks, greatly reducing company-specific risk. Like stocks, ETFs trade on exchanges, nearly all of them, in fact, trade on the American Stock Exchange at present. They quote throughout the day, enabling traders to take advantage of intraday price moves.

If you're new to exchange-traded funds, be sure to visit TradingMarkets' Knowledge Center, dedicated to explaining the basics of trading and active investing in ETFs and mutual funds. Just click on the Funds tab near the top of this page, then click on the Knowledge Center tab. 

You also will find lessons on trading exchange-traded funds in the Stocks Education area of TradingMarkets.com. In particular, check out my three-part series on trading ETFs, starting with Moving Average Crossovers. I also recommend newcomers read my tutorial, Trading HOLDRs: Unique Opportunity And Risk.