Technology is the largest sector weight in the S&P 500 and the best-performing group in the benchmark U.S. equity index this year, a theme that has been beneficial for an array of exchange traded funds, such as the Technology Select Sector SPDR (NYSEArca: XLK), the largest technology ETF by assets, and the PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100 Index.
With the sector soaring, market values for individual names within the group are rising, meaning technology stocks are taking on increased importance within the S&P 500 and other major broad market benchmarks.
“The high weighting and strong performance heading into earnings season have tied the S&P 500’s performance closely to that of technology stocks, especially over the last three months. During that time period, tech had the highest correlation to the S&P at 0.87,” according to CNBC.
As of Oct. 26th, technology accounted for 23.7% of the S&P 500, or nearly 900 basis points more than the index’s allocation to financial services, its second-largest sector weight. Combined, industrials, consumer staples and energy barely account for more than S&P 500 than tech on its own. Five of the S&P 500’s top 10 holdings are tech stocks.