The top 5 have set a new record

Thanks to the big tech stocks that we're all so familiar with, the most important equity index in the world has become historically top-heavy.

For the first time since 1979, only 5 stocks account for more than 20% of the S&P's market cap. Back then, it was IBM and AT&T with more than 6% weight each, followed by GM, GE, and Kodak.

Over the past year, these top 5 stocks have accumulated an additional 5% of market cap relative to the other ~500 stocks in the index, exceeding their rate of growth in 2000.

Because the large stocks are dominating the index so much right now, the index itself can show a gain even when most of its stocks are declining. That's what happened on Monday, and to a historic degree. Never before in 30 years has the S&P risen so much on a day when so many more of its component stocks declined rather than advanced. It wasn't just the S&P. Across the entire NYSE, more securities declined than advanced, and more volume flowed into those declining issues. 

We tend to not put a lot of weight on single-day breadth readings. Sometimes a single stock can heavily skew volume figures, or some weird news event can trigger an odd reading. It's more worrying when these oddities pile up. 

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We also looked at:

  • What happens when the S&P 500 rallies but most of its stocks decline
  • What happens when the S&P 500 rallies but most issues on the NYSE (and most volume) are negative
  • Foreigners bought a record amount of U.S. stocks relative to market cap
  • Silver is making big daily jumps to new yearly highs - how it reacted after similar spikes
  • The VIX "fear gauge" has dropped for 15 out of 18 weeks

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The post titled The top 5 have set a new record was originally published as on on 2020-07-22.

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