Stocktake: A narrow rally is a fragile rally

Investors will be hoping market breadth improves

Traders on the floor of the  New York Stock Exchange: Today’s market is even more concentrated than the late 1990s technology bubble. Photograph:  AP Photo/Richard Drew

Traders on the floor of the New York Stock Exchange: Today’s market is even more concentrated than the late 1990s technology bubble. Photograph: AP Photo/Richard Drew

 

US stocks are nearing February’s all-time highs but the narrowness of this rally is a growing concern. Goldman Sachs last week noted the five largest stocks – Apple, Amazon, Microsoft, Google and Facebook – have gained 35 per cent this year, whereas the remaining 495 stocks in the index have fallen 5 per cent.

Those five tech stocks account for 22 per cent of the index. On average, the five biggest stocks have historically accounted for only 14 per cent of the index. Today’s market is even more concentrated than the late 1990s technology bubble, when large-cap tech stock strength kept indices aloft even as the rally grew ever more narrow. Although the S&P 500 was last week within 5 per cent of 52-week highs, more than 60 per cent of the index is over 10 per cent below their own highs – something that hasn’t happened since September 2000, according to SentimenTrader data.

On Monday last week, the S&P 500 enjoyed decent gains but there were more decliners than advancers on the New York Stock Exchange (NYSE). That has only happened on five occasions, says SentimentTrader, all of which were in 2000 or 2008.

Similarly, it notes that while the Nasdaq gained over 2 per cent, only around half its stocks rose that day – a combination unseen since February 2000, just prior to the bursting of the tech bubble. Investors will be hoping market breadth improves. A narrow market rally is a fragile market rally.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.