Energy vs. Technology 2020-2022

Energy sector (blue) is decisively outperforming Tech (orange).

Performance spread now at +23%

S&P 500 technology index dominated by a handful of stocks

The biggest U.S. technology companies dominate their industry group to a degree that poses risks for investors, according to David Kastner, a senior investment strategist at the Schwab Center for Financial Research. Kastner singled out Apple Inc., Microsoft Corp. and Nvidia Corp. in a blog post Thursday. They ended last week with a combined 51% weight in the S&P 500 Information Technology Index, according to data compiled by Bloomberg. The index’s top three are poised to increase their share of its value for a fifth straight year. 

 

*** 8 months later *** 

S&P 500 tech stocks approach dot-com era valuation peak

U.S. technology stocks may soon be more costly than they ever were in the dot-com era. The S&P 500 Information Technology Index closed Monday at 7.43 times projected sales, according to data compiled by Bloomberg. That’s less than 0.3% from a record in March 2000. The industry is challenging the high 3 1/2 years after the S&P 500’s forward price-sales ratio first topped its own March 2000 peak. Technology-stock valuations are at odds with “unprecedented headwinds” such as fiercer competition, higher taxes and stricter regulations, Morgan Stanley Wealth Management wrote in a report Monday.

S&P 500's tech stocks turn into dead weight for a change

Technology stocks rarely trail the rest of the S&P 500 Index’s main industry groups for a quarter. It’s even less common for the index to rise when tech ranks last out of the 11 sectors. Yet both are poised to happen this quarter. The S&P 500 Information Technology Index is in position for its second last-place finish since 2008, according to data compiled by Bloomberg for the first quarter. During the same period, the S&P 500 rose 5.4%. Any advance would be the first since 2004 for a quarter when tech, which has the S&P 500’s highest weight at 26%, was the biggest laggard.

Finance, energy trail S&P 500 tech weight more than 2000

Financial and energy stocks, once dominant within the S&P 500 Index, are taking even more of a back seat to technology shares than they did as a bull market ended 20 years ago. The two industry groups together have trailed the weight of the S&P 500 Technology Index by as much as 17 percentage points this month, according to data compiled by Bloomberg. That’s less than a point away from a low in March 2000 -- a figure that isn’t adjusted for a September 2018 index shift, which lifted the ratio by 5.1 points in just one day. Bespoke Investment Group LLC highlighted the comparison in a blog post Monday.

Apple, Microsoft are taking on S&P 500 financials' weight

Apple Inc. and Microsoft Corp. count almost as much in the S&P 500 Index as all its banks, insurers and other financial companies combined. The makers of iPhones and Windows software amounted to 12.6% of the S&P 500’s value as of Thursday, according to data compiled by Bloomberg. Their weight approached the 12.9% for the 66 companies in the S&P 500 Financials Index plus Visa Inc., Mastercard Inc. and PayPal Holdings Inc., classified as technology stocks. The comparison was made by Jonathan Krinsky, chief market technician at Bay Crest Partners LLC, in a note Thursday.

Apple, Microsoft become S&P 500's biggest duo in decades

Apple Inc. and Microsoft Corp. play a bigger role in the S&P 500 Index these days than any two companies have in decades. The maker of iPhones and the supplier of Windows software accounted for 12.5% of the index’s value between them as of Tuesday. Their combined weight exceeded every year-end total for the S&P 500’s top two companies since 1980, according to data compiled by Bloomberg and S&P Dow Jones Indices LLC. International Business Machines Corp. and American Telephone & Telegraph Co. together were 10.9% of the index in 1982, before AT&T was broken up.

 

Five biggest companies in the S&P 500

There’s a distinction to be made between the S&P 500 Index’s five biggest companies and all the rest, according to BCA Research. The firm compared the total market value of the five -- Amazon.com Inc., Apple Inc., Facebook Inc., Google owner Alphabet Inc. and Microsoft Corp. -- with the value of the other 495 companies in a chart last week. The top five’s value increased 266% from the start of 2015 through Tuesday, according to data compiled by Bloomberg. In the same period, the value of the rest rose just 25% -- and the entire gain occurred after the S&P 500 set this year’s low in March.

Technology looks too top-heavy in S&P 500 for Jefferies

Technology stocks have become so top-heavy within the S&P 500 Index that they pose a risk for the broader market, according to Sean Darby, Jefferies Group Inc.’s chief global equity strategist. Darby raised the issue in a report Wednesday after estimating that technology accounts for 40% of the S&P 500, above a peak in March 2000. The figure reflects the total weight of companies in the S&P 500 Technology Index along with Amazon.com Inc. and Netflix Inc., which Darby cited though they aren’t in the industry gauge, and companies such as Facebook Inc. that were removed in 2018.

How low can U.S. banks go versus tech?

Favoring U.S. bank stocks over the shares of technology companies “just does not make sense” based on relative performance, according to David Keller, chief strategist at Sierra Alpha Research LLC. Keller drew the conclusion Thursday in a Twitter post that cited the ratio between the Financial Select Sector SPDR exchange-traded fund and its technology counterpart. The ratio fell as much as 17% after setting a record low on March 12, according to data compiled by Bloomberg. The previous low was recorded in March 2000, about 15 months after the ETFs began trading.

U.S. bank stocks approach turning point relative to tech

Shares of U.S. banks have become so weak by comparison with technology stocks that a turning point is coming soon, Jonathan Krinsky, chief market technician at Bay Crest Partners LLC, wrote in a report Wednesday. He cited the ratio between the KBW Bank Index and the Nasdaq-100 Index, which closed at record lows the past two days. Wednesday’s ratio was 39% below the average for the past 200 trading days, according to data compiled by Bloomberg. The historically large gap shows “we are in the ballpark” for a swing toward banks, Krinsky wrote.

Amazon, Apple, Microsoft firm up industry-group dominance

The three biggest U.S. companies by market value are gaining even more dominance within their industry groups in a bear market. Amazon.com Inc. accounted for as much as 45.5% of the total value for companies in the S&P 500 Consumer Discretionary Index last week, according to data compiled by Bloomberg. The third-most-valuable company’s share was 9.9 percentage points higher than on Feb. 19, when an almost 11-year bull market in U.S. stocks ended. No. 1 Microsoft Corp. and No. 2 Apple Inc. peaked at a combined 41.8% of the S&P Technology Index’s value on March 18, up two points from Feb. 19.

 

Apple, Microsoft pack S&P 500's biggest punch in decades

Apple Inc. and Microsoft Corp. have more power to set the S&P 500 Index’s course than any two companies have had in decades. Their combined weight closed at more than 10% on Monday for the first time ever, according to data compiled by Bloomberg. The total exceeded a December 1999 peak of 9.4% for Microsoft and General Electric Co., which had the most weight back then. The S&P 500’s top-two weights since the mid-1980s were cited in a Twitter post Monday by Carter Worth, head of technical analysis at Cornerstone Macro LLC.

S&P 500 energy vs tech at lowest level since March 2000

Energy producers have almost completed a 20-year round trip relative to technology companies within the S&P 500 Index. The ratio between their S&P 500 industry-group indexes fell this week to its lowest level since March 2000, when an Internet-driven bull market peaked. The low followed the ratio’s 87% retreat from a high in July 2008, when oil traded at a record $147.27 a barrel in New York. “Can energy stage a rally while tech falls? We think so,” Jonathan Krinsky, chief market technician at Bay Crest Partners LLC, wrote Wednesday in a report that highlighted the ratio.

Nasdaq stocks, U.S. high-yield bonds on bubble watch

Prospective bubbles in U.S. technology stocks and high-yield bonds represent the biggest risk for markets, according to Michael Hartnett, chief investment strategist at Bank of America Corp.’s Merrill Lynch unit. He cited the Nasdaq Composite Index and Merrill’s U.S. high-yield index in a report Thursday. Any surge in the indicators would mark the end of an “era of excess liquidity and disruption,” Hartnett wrote, referring to central banks’ easing of credit and technology’s effect on business.