Tech sector deposes financials to reclaim top spot in S&P 500

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Financial stocks have lost their seat on the throne of the Standard & Poor’s 500 index.

The new king of the index is the old king: technology.

The financial sector accounted for 16.2% of the S&P index’s market value as of the close of trading today, according to analyst Howard Silverblatt at S&P in New York. For the first time since 2002, that dropped the sector to the second-largest weighting in the index. Moving to No. 1: technology, at 16.3% of the S&P.

The No. 3 group -- with a bullet -- is energy, at 14.9% of the index.

If you own a fund that tracks the S&P 500, the industry sector weightings basically tell you what you own under the surface of the otherwise faceless index.

At any given moment, the sector weightings depend on which stocks S&P has put in the index and how those stocks have performed relative to the rest of the market (because the index is capitalization-weighted).

As of March 2000, after S&P had loaded up the index with tech stocks in the late 1990s -- and as the prices of those shares rocketed amid the dot-com bubble -- tech reached a ridiculous peak weighting of 34.5% of the S&P 500. Financials were a distant second at that point, at 12.9%.

As tech stocks crashed from 2000 to 2002, the sector’s weighting in the S&P index shrank to a low of 12.8% by October 2002. Financials were No. 1 at that point, at 19.5% of the index, and they’ve stayed on top ever since -- until today.

What the shift shows is that investors continue to mark down the values of many financial stocks while favoring many tech issues. Over the last three months financial stocks in the S&P have fallen 5.6%, on average, while tech shares in the index are up 10.6% on average.

The good news is that no group is as dangerously dominant in the S&P index as tech was in 2000. That was an accident waiting to happen -- and it was the main reason the S&P lost almost half its value between 2000 and 2002, devastating the portfolios of many investors who figured indexing was a relatively safe strategy.