Financials add $430bn to US stocks Surging shares of banks and other financial companies have added $430bn to the value of the US stock market this year, even as they have been forced to lay off staff and curb lucrative trading practices. The financial sector has been the best performing segment of the S&P 500 in 2012, recording a gain of just under 25 per cent and beating a 19 per cent rise for the consumer disretionary sector, which includes retailers and other companies exposed to the revival in US consumer confidence. With just one more truncated trading session to go, and despite tortuous discussions over a fiscal cliff budget deal on Capitol Hill, US equities are poised to register an overall annual gain of 12 per cent, following a flat showing in 2011. The market value of the 81 financial companies in the S&P 500 has swollen to $1.98tn from $1.53tn, according to S&P Dow Jones Indices. Bank of America more than doubled in value, and there were 10 companies in all whose shares gained more than 40 per cent this year. "Part of this is about where you start from," said Jason Goldberg, banks analyst at Barclays. Banks have underperformed in seven of the past eight years. The five best performers this year were all in the bottom six in 2011. You could have bought all the worst stocks at the end of last year, closed your eyes and made a boatload of money. Financial sector companies have had to confront a host of new regulations born out of the credit crisis, forcing them to hold more capital and liquid assets and to curb some of the riskier trading practices that led to the meltdown of 2007-09. But their repaired balance sheets have encouraged investors back into the sector, particularly since many institutions resumed dividend increases and share buybacks after passing their latest Federal Reserve "stress tests." At the same time they have reported lower losses on crisis-era loans, cut costs and begun to enjoy a boom in new activity, such as originating mortgages, Mr Goldberg said. Alabama-based Regions Financial was the best performing financial stock after Bank of America, with a rise of 61 per cent. Citigroup was up 48 per cent, Goldman Sachs 39 per cent and JPMorgan Chase 30 per cent. After financials and consumer discretionary stocks, the third-best performing sector was healthcare, as President Barack Obama's industry reforms began to come into force. About $230bn was added to the market by the information technology sector this year, the only sector larger by value than the financials. It contains industry giants such as Google, Microsoft and IBM, but is dominated by Apple, whose shares have risen 26 per cent this year. Apple shares showed a 73 per cent gain at their peak in September, when it was the world's most valuable company at $660bn. However, fears of a slowdown in the growth of iPhone and iPad sales have contributed to profit-taking since then. The only sector of the S&P 500 recording a decline this year was utilities. Defensive stocks fell out of favour as investors sought alternatives more sensitive to the US economic recovery.