Christmas Has Come and Gone, U.S. Tech Stocks Show

Technology companies and utilities, the pillars keeping the U.S. bull market from collapsing, are trading near their most expensive valuations in at least three years.

The last time the market was so dependent on computer- related companies and power producers was in the three months ended March 2000, just before the Standard & Poor's 500 Index began a 2 1/2-year, 49 percent plunge, according to data compiled by Bloomberg.

``It's a time to be careful,'' said John Carey, who helps oversee about $82 billion in U.S. assets at Pioneer Investment Management in Boston. Valuations for some technology companies and utilities ``from a historical standpoint seem high.''

Technology in the S&P 500 traded at an average 29.1 times earnings this month, the most since 2004, weekly data compiled by Bloomberg show. Dividend yields paid by utilities are the smallest compared with the index in at least 12 years.

While U.S. stocks have climbed in the fourth quarter every year since 2000 and 73 percent of the time since the Great Depression, the S&P 500 would have a gain of just 0.3 percent this year without advances in technology stocks led by Google Inc. and Apple Inc. and utilities including Allegheny Energy Inc., according to the data.

``Could we have a year-end rally? It certainly seems more difficult this time around,'' said Alessandra Querini at Aletti Gestielle SGR in Milan, which oversees about $19 billion.

Cisco's Warning

Technology is responsible for 13 percent of this year's S&P 500 advance. Since Nov. 7, when Cisco Systems Inc. reported a ``dramatic'' drop in sales to financial and automobile companies, the Nasdaq Composite Index retreated 4.4 percent, contributing to the biggest weekly decline since April 2002. The index gets 44 percent of its market value from computer-related shares.

Before San Jose, California-based Cisco's announcement, technology and utilities were the only two of 10 industry groups in the S&P 500 to post increases since September. The index has lost 4.8 percent in the fourth quarter, dragged down by a 12 percent drop in financial shares.

The S&P 500 slid 3.7 percent last week to 1,453.70, paring its 2007 advance to 2.5 percent. December futures on the S&P 500 today advanced 0.3 percent as of 10:29 a.m. in London.
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