Apple retreat spurs switch out of techs A hefty drop in shares of Apple in recent weeks has driven a rotation out of technology shares and reinforced the standing of financials as the best performing major sector in the S&P 500 so far this year. A near-10 per cent slide by Apple during the past three weeks has seen the technology sector slide behind financials, telecoms and consumer discretionary stocks in terms of year-to-date performance in 2012. At the start of October both financials and techs were up 20 per cent on the year, and since then investors have altered their portfolios as the final quarter of the year has got under way. "Often at the end of the quarter, investors look at winners and losers and rotate their holdings," said Andrew Brooks, head of US equity trading at T Rowe Price. That shift has been led by shares in Apple, the most valuable US company in terms of market capitalisation, falling from last month's intraday record high of $705.07 to a low of $623.55 this week. "It is the Apple effect, it's such a dominant performer and had gone up so much," said Jack Ablin, chief investment officer at Harris Private Bank. With Apple carrying a weighting of 24 per cent in the S&P technology index, three times more than its closest rivals IBM and Microsoft, the drop in such a valuable constituent has hit the index hard. "We believe that the tech sector as well as Apple in particular got a little ahead of itself over the past few months and this correction is natural," said Ryan Detrick, senior technical strategist at Schaeffers. Also playing a role is the third-quarter earnings season that steps up on Friday with the release of results from JPMorgan and Wells Fargo. Mr Detrick said that negative outlooks from Hewlett-Packard, Dell and Intel have also weighed on tech sentiment. The technology sector is forecast to show a third-quarter earnings growth rate of 1.3 per cent compared with the same quarter a year ago, according to FactSet. While that exceeds the forecast of a 2.7 per cent decline for the broad S&P 500, techs lag behind the financials sector, which is expected to notch a quarterly growth rate of 10 per cent. "Financials were cheap and, relative to their peers, are trading at a 20 per cent discount to the market," Mr Ablin said. The outlook for techs could improve as lower prices attract renewed buying. "Our analysis shows that some hedge funds and big institutions have missed the summer rally, so we expect them to leverage up and play a catch-up, all the while pushing prices higher," Mr Detrick said.