Financials Resuming Lead Among S&P 500 Sectors From Technology After Big Q2 Profits Top Expectations

After five years of dominance as the U.S.' most profitable sector, technology could lose its top position in Standard & Poor’s 500-stock index to a resurgent financial sector in the third quarter.

As the reality of the financial downturn became clear in 2008, banks, brokers and insurance companies' earnings plummeted, dragging the S&P 500 down about 23.36 percent that September. By contrast, the financial market crisis at the time contributed to the energy sector becoming the most profitable sector, posting a 41.37 percent increase.

Since 2008, technology has been the leading sector, with an intermittent resurgence from finance. Indeed, as the banking sector now gains strength amid the six largest U.S. banks all recording increased first-half revenue, the financial sector has seen itself top the S&P 500 far more often.

For example, June S&P results put the financial sector back on top by a nearly 5 percent gain. Projections for September see only a slight difference of 0.05 percent, but as December approaches, the tech sector, powered by consumers' holiday spending, should reclaim its leader position, according to Standard & Poor’s projections.

“The fact that we are seeing banks perform reasonably well provides a certain sense of confidence in the underlying economy,” Kevin Caron, a market strategist at Stifel Nicolaus & Co., in Florham Park, N.J., said. “Without the financials working, it would be hard to imagine that all the rest would be working at all.”

While both JPMorgan & Chase Co. (NYSE:JPM) and Microsoft Corporation (NASDAQ:MSFT) had about $21 billion in net income in 2012, earnings at the largest U.S. bank by assets were higher than Microsoft's last quarter as trading and investment banking picked up and demand for personal computers declined. JPMorgan said its profit rose 31 percent to $6.5 billion, while Microsoft, maker of the Windows operating system, reported a 12 percent decline to $5 billion during the previous quarter.