The S&P 500's nine-day winning streak masks a rare divergence: more stocks are falling than rising, a pattern never seen in three decades of data.
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S&P 500 extends winning streak to 9 days as breadth narrows
The S&P 500 rose for a ninth straight session Tuesday, but negative breadth for six consecutive days signaled a narrowing rally with no historical precedent since 1996.
"More S&P 500 stocks fell than rose for six straight trading sessions, even as the index itself kept moving higher," said Jonathan Krinsky, chief market technician at BTIG. Based on data going back to 1996, the benchmark has never before risen for six straight days while decliners outnumbered advancers each day, he said. The prior record was three sessions.
Over the past five trading days, only two of 11 S&P 500 sectors posted gains: technology rose 5.9% and energy added 0.3%, according to Dow Jones Market Data. Three sectors fell 3% or more — real estate, utilities and communication services — highlighting the extreme concentration driving the headline index higher. Information technology now accounts for nearly 40% of the S&P 500, a record high, while the top 10 stocks represent roughly 40% of total market value.
The divergence between the S&P 500's gains and the weakness across most of its members creates what Krinsky calls the "breadth paradox." As long as the largest stocks keep climbing, the index can advance even as many components struggle. But if momentum in those leaders reverses, the same concentration could pull the index lower even if participation improves elsewhere.
Concentration Risk Reaches Record Levels
The rally's reliance on a shrinking group of mega-cap stocks echoes patterns that have historically preceded market pullbacks. The Philadelphia Semiconductor Index jumped 69% in April and May, a two-month surge matched only by the final leg of the Internet bubble in early 2000, according to Renaissance Macro strategist Jeff DeGraaf. His firm's sentiment gauge for semiconductors recently entered the 95th percentile, a zone where historical returns over the following 12 months have been "highly unlikely to be sustainable."
The S&P 500's forward price-to-earnings multiple has compressed to 21.4 from above 23 six months ago, even as the index rose 10% from its October peak. Ned Davis Research U.S. equity strategist Ed Clissold noted that when year-over-year earnings growth exceeds 20%, annualized index returns have historically averaged around 2%, as investors anticipate companies will struggle to maintain such rapid profit expansion.
The U.S. 10-year Treasury yield traded near 4.46% Tuesday, while the Cboe Volatility Index held at 15.77, down 1.7% on the day but still reflecting subdued hedging demand. Investment-grade corporate credit spreads have compressed back to cycle lows, suggesting investors are pricing minimal compensation for adverse surprises.
Krinsky said June is a "likely spot" for a reversion to begin. "When we finally get a sustained momentum unwind, you can easily get a situation where breadth is strong, yet major indices fall anyway," he wrote.
This article is for informational purposes only and does not constitute investment advice.
