S&P 500 Nears All-Time High, But 60% Are in a Bear Market?..."Only a Few Tech Stocks Celebrating"

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The S&P 500, a flagship index of the New York stock market, is on the verge of setting a new all-time high, but within the index, extreme polarization is evident, with the majority of stocks falling into a bear market. Large-cap AI-related tech stocks are driving the index up, but tariffs, high oil prices, and borrowing cost burdens are weighing down the underlying stocks.

MarketWatch reported on September 21 (local time), citing Dow Jones market data, that even as the S&P 500 index approached its previous high of 7,798.99, 59.2% of its constituent stocks had fallen more than 20% from their all-time highs. Typically, Wall Street defines a drop of more than 20% from a peak as a bear market. This phenomenon, where the majority of constituent stocks remain in a bear market while the index is within 1% of its all-time high, is the first since late 2020.

The index's rise has been extremely concentrated in a few large-cap stocks. Mega-cap tech stocks, dubbed the Magnificent Seven, along with semiconductor and hardware stocks like AMD, have primarily driven the index's gains. The market is focusing on the estimated $1 trillion annual investment in AI infrastructure equipment and corporate earnings growth expected to continue for several years. In contrast, cyclical consumer sectors such as utilities, auto parts, textiles, and luxury goods have struggled, falling near their 52-week lows. Anthony Saglimbene, Chief Market Strategist at Ameriprise, explained, "While the index headed towards an all-time high, the market breadth of rising stocks actually weakened."

Deteriorating macroeconomic conditions are directly impacting consumers and traditional businesses. As Brent crude, the international oil price benchmark, surged 25% to nearly $100 per barrel over the past three months, average households are facing the burden of gasoline prices at $4.5 per gallon and diesel prices reaching $6.5. With the 10-year Treasury yield approaching 5% and the Federal Reserve's (Fed) hawkish tightening stance, the burden of loan interest payments has also increased. However, in the high oil price environment, refining stocks such as Marathon Petroleum (MPC), Valero Energy (VLO), and Phillips 66 (PSX) traded near their all-time highs, showing a clear contrast.

Market evaluations among Wall Street experts are mixed. Chris Galipeau, Senior Market Strategist at Franklin Templeton Institute, analyzed, "Despite high oil prices and interest rate burdens, corporate earnings and economic fundamentals proved more robust than expected during the first half of the year." Kevin Gordon, Head of Macroeconomic Research at Charles Schwab, also assessed, "It's a cyclical process where sectors take turns experiencing weakness and undergoing corrections," adding that "the market is cautiously climbing a wall of worry."

[Article Key Summary]

-The S&P 500 index is on the verge of breaking its all-time high, but 59.2% of its constituent stocks have fallen more than 20% from their peaks.

-While AI and big tech mega-caps are clearly leading, many sectors such as consumer goods and utilities are being hit by high interest rates and high oil prices.

-On Wall Street, caution regarding the narrowed market breadth is clashing with expectations for further gains based on corporate earnings.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*