April 21 (Bloomberg) -- Technology stocks in the Standard & Poor’s 500 Index are off to the best start to a year since 1998 as investors buy companies with the most cash during the worst credit crisis since the Great Depression.

The CHART OF THE DAY shows that the Information Technology Index of 75 software and computer makers in the S&P 500 rallied 9.7 percent this year, the steepest gain since 1998 and the most among 10 industries. The last time the gauge began a year faster, it went on to climb another 42 percent, spurring a 27 percent annual advance for the S&P 500.

“There are plenty of technology companies out there that have stellar balance sheets,” said John Wilson, who helps oversee $120 billion as co-director of equity strategy at Morgan Keegan & Co. in Memphis, Tennessee. “That would bode well for them because there’s still a huge amount of uncertainty about the financials’ balance sheets. People know there’s still a lot of bad debt.”

Technology companies in the S&P 500 on average have the most cash and least borrowings relative to total assets among 10 industries, according to Bloomberg data. Eighteen of them are debt-free, including Apple Inc., Google Inc. and Qualcomm Inc., twice the number in all other industries combined, data show.

Technology suppliers preserved their lead over banks and chain stores even after financial companies rallied 62 percent and retailers gained 40 percent from their March lows. Computer and software makers are the fifth best-performing industry in the S&P 500 since March 9, rising 27 percent.

Oracle Corp.’s cash allowed it to pay $7.4 billion upfront for Sun Microsystems Inc. after Sun’s deal with International Business Machines Corp. fell apart. IBM said it had $12.3 billion of cash as of March 31 when it reported earnings yesterday, up 14 percent from a year earlier.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

Last Updated: April 21, 2009 00:01 EDT