One of the biggest reasons for the market's brighter outlook lately has been the performance of the tech sector. The tech-heavy Nasdaq Composite Index closed above 200 last week, for the first time since October, and is up more than 25 percent for the year. The Nasdaq is up nearly 60 percent since bottoming out at 1268 on March 9. (It is still 43 percent off its peak of 2859 on Oct. 31, 2007.)
Technology stocks are also the top-performing industry sector in the Standard & Poor's 500, too. Taking tech stocks out of the mix, the S&P would be up only 7.9 percent this year instead of its actual 12 percent.
There are a couple of reasons for this. After getting destroyed in the tech crash of 2000, technology firms now tend to keep more cash on hand for a rainy day - leaving them well-positioned to survive both a business downturn and the recent credit crunch. Even more than that, tech issues are one of the most cyclical stocks out there, following the business cycle up and down. It makes sense that they would be leading this recovery - and that they'll be the first sector to deflate the next time the economy turns down.
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