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Odd Data Point: Tech Passes Finance in SPX

Wednesday, May 21, 2008 | 10:50 AM

in Earnings | Finance | Index/ETFs | Markets | Valuation

How is this for an odd data point? Bank stocks are no longer the largest industry group in the SPX, having been recently bypassed by Technology.

That's according to this article by Bloomberg News:

"Bank stocks lost their position as the biggest industry group in the Standard & Poor's 500 Index to technology companies after tumbling 31 percent since 2006.

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 yesterday's closing prices. Financials, led by Bank of America Corp. and JPMorgan Chase & Co., fell to 16.19 percent.

Banks slid the most among 10 industries in the S&P 500 last year [-21%] and are the worst-performing group so far in 2008, as lower U.S. real-estate prices led to losses on mortgage debt and derivatives approaching $380 billion globally...

Financial shares in the index declined almost 21 percent in 2007, their worst year since a 24 percent drop in 1990. They have plunged 31 percent since the end of 2006."

I saw that and wondered if this might be some sort of a contrary indicator. I may actually have to pull all of the prior leadership changes in the SPX500, and other indices, and see if there is any significance. I would be curious to see if perhaps there might be a paired trade (i.e., Long Finacials, short Tech)

Regardless, in the S&P500, its now Banks #2, Tech #1.

Source:
Drop in Bank Stocks Leaves Technology Biggest S&P 500 Industry
Elizabeth Stanton
Bloomberg, May 21 2008
http://www.bloomberg.com/apps/news?pid=20601213&sid=adD4MfoIscYo&

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Comments

So the S&P500 performance over the last year would be worse, significantly worse, if they hadn't been re-jiggering their composition? That's what I'm hearing in this post.

It's must be a Bullish indicator. Buy More Stock!

~~~

BR: Not rejiggered -- the change was due to market cap weight as banks dropped . . .

Posted by: VoiceFromTheWilderness | May 21, 2008 11:04:41 AM

The shift to technology leadership in the S&P500 may be a good thing long-term, if it can hold its place. The immediate reason tech is #1 is largely the poor performance of the banking industry. Nonetheless, the combination of innovation, productivity, and global perspective the tech sector provides is a more solid foundation for a recovery than the Ponzi-like financial schemes we've seen in the banking industry.

Tech may be the US economy's last, best hope for continuing global economic leadership.

Posted by: Lilguy | May 21, 2008 11:05:21 AM

sure it is after the machine has tried to pile everyone into tech it makes sense that articles and attitudes espousing that would start to come out. What else do they have left to sell us???

They are out of ammo. and it really shows...

Tech was dead already...this is just a dead cat bouncing.....

BTW Superbikes may not be my thing afterall...

Ciao
MS

Posted by: michael schumacher | May 21, 2008 11:11:46 AM

like those futures buys today??.....trying to prevent a meltdown.....

Ciao
MS

Posted by: michael schumacher | May 21, 2008 11:47:23 AM

MS -

Is there anyway that us unwashed masses without bloombrg terminals can see the futures trading you are referring to?

Liv

Posted by: Liv | May 21, 2008 12:01:50 PM

Wild-assed guess is that the last leadership swap (round trip) was between these two circa 1999-2000. Prior to that, are financials as largest sector the rule? Did they even give it up in 1990?

Posted by: ramstone | May 21, 2008 12:34:15 PM

I think the historical data will show that financials were No. 1 for very little of the time. By contrast, the spikes up to No. 1 often do signal a peak is approaching for a given industry.

In the 70's energy shot from 7% of S%P to something like 30% and it was all downhill from there.

Likewise tech in the late 90's.

I don't think the big shift has occurred yet in the current market, so your trade idea may be premature (though right-thinking.)

Posted by: Stock Market Beat | May 21, 2008 1:24:37 PM

Helene Meisler made a related point recently - falling Bank Index Ratio to S&P-500. See: http://www.thestreet.com/p/_rms/rmoney/technicalanalysis/10417305.html

Posted by: Joe Bentz | May 21, 2008 1:27:33 PM

i dont think you should short tech, you can go long on financial. Tech did get to number 1 by wild valuation, so why short it?

Posted by: Mark | May 21, 2008 1:39:29 PM

Liv-

Unfortunately you are correct there is not a public site to watch these. Not a coincidence IMO.

My information came from a friend's email of the $SPX from B'berg.....

Ciao
MS

Posted by: michael schumacher | May 21, 2008 2:51:43 PM

Not necessaryily a contrary indicator Barry.

S&P index piled into energy stocks (CPN, ENE) in a big way just as they began nose-diving. If I recall correctly...

Posted by: IdahoSpud | May 21, 2008 3:55:17 PM

This looks more like an ex-post facto sector rotation LOL.