Technology stocks unseated financial companies as the largest industry group in the Standard & Poor’s 500 Index, reclaiming the top spot they last held in 2002.
Computer and software makers led by Microsoft Corp. and International Business Machines Corp. accounted for 16.26 percent of the benchmark for large U.S. companies based on Tuesday’s closing prices.
Financials, led by Bank of America Corp. and JPMorgan Chase & Co., fell to 16.19 percent from 16.4 percent.
Banks lost the most among 10 industries in the S&P 500 last year, and they are the worst performing group so far in 2008, as decreasing U.S. real-estate prices led to losses on mortgage debt and derivatives approaching $380 billion globally.
“The earnings power of the financial sector has been impaired because of the credit crunch,” said Thomas J. Lee, chief U.S. equity strategist at JPMorgan in New York. “Technology is benefiting from a global economy that’s been expanding, particularly in emerging markets.”
As the S&P 500 has retreated 3.7 percent this year, its financial components have slid almost 13 percent. Bear Stearns Cos. fell the most, dropping 89 percent as a run on the brokerage firm prompted the Federal Reserve to broker a March 16 takeover by JPMorgan.
Bear Stearns, the fifth-largest securities firm and once the biggest underwriter of U.S. mortgage bonds, ran short of cash after a surge in withdrawals by customers and lenders.
Financial shares declined almost 21 percent in 2007, their worst year since a 24 percent drop in 1990.
Technology shares are the fourth worst-performing industry group this year, sliding 5.9 percent. Last year, when only financial and consumer discretionary shares declined among the 10 industry groups in the S&P 500, technology was the fourth-biggest gainer, adding 16 percent.
Energy in December surpassed health care to become the third-largest group for the first time since December 1990.
Financials have been the biggest industry group in the S&P 500 every month since February 2002, according to Standard & Poor’s. During that time, technology has been second largest, except for periods during July 2002 through April 2003, when health care was larger than tech in eight of the 10 months.
Financials first became the biggest group in the index in December 1995, when they unseated consumer discretionary companies. Financials were surpassed by technology in December 1998, and technology was dominant every month through February 2001.
From March 2001 through January 2002 the two groups alternated as biggest.
— Bloomberg News