S&P 500 Breadth Shrinks as Seven Stocks Hold 35%

The S&P 500’s breadth narrowed to 22%, the third-lowest reading since 1996, with only 22% of constituents outperforming the index over the past 30 days. Seven mega-cap technology companies now account for nearly 35% of the index’s market capitalization.

Including the top 10 firms raises that share to about 38% of the S&P 500’s market value and roughly 30% of its reported profits. The Information Technology and Communication Services sectors together represent about 46% of the index’s total value.

The headline S&P 500 recently reached 7,398 while many individual components lagged. Only 22 S&P 500 stocks were trading at all-time highs, compared with a peak of 97 in March 2013.

About 51% of S&P 500 stocks trade above their 50-day simple moving average, leaving the remainder below that common short-term benchmark. An equal-weighted version of the index produced more modest returns over the same period.

Analysts at Goldman Sachs and Bank of America have flagged risks tied to the concentration in a small number of large-cap stocks. Passive, cap-weighted fund flows increase demand for the largest companies, which in turn raises their market caps and index weights.

Market breadth measures such as the percentage of constituents outperforming the index and the share trading above short-term moving averages are used to assess whether gains are broad-based or narrowly concentrated. Historically, periods of narrow leadership have been followed by increased market volatility.