The S&P 500’s (^GSPC) record run has some bumps in it that appear to be increasing.
On Friday, the S&P 500 closed 7.7% above its 50-day moving average, but only 52% of its constituents closed above their own 50-day moving average, BTIG strategist Jonathan Krinsky noted in a new note. Over the past 30 years, the S&P 500 has never had less than 55% of its constituents above their 50-day moving averages, when the index itself was at least 7% above its 50-day moving average, Krinsky noted.
Furthermore, since 1990, Friday’s session was only the third time in history that the S&P 500 had more lows than highs on a day in which the S&P 500 itself reached a new high.
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“As the semi-finals and technology continue to rise, the debate over whether it is sustainable or justified seems to grow along with it,” Krinsky wrote. “However, what started as a conversation between AI and semiconductors should now translate to the rest of the market. So, in addition to asking when the SOX (Philadelphia Semiconductor Index) peaks, we should also ask: why can’t anything else go up?”
Krinsky added: “Even if the tech/AI price action is justified, there is a difference between tech leading when most stocks are going up, and semis going parabolic when most non-tech stocks are moving sideways or down. Maybe the market is simply taking its time before we see the long-awaited widening, but if we continue to see the 52-week lows expand, it’s more likely we’ll see a tech ‘recovery’ rather than the average ‘recovery’ of the stock.”
The stock market context, at a glance: The US stock market’s rise to record levels this month is being fueled by a powerful triple threat of fundamental factors: strong corporate earnings led by big profits, a surprisingly resilient labor market and an easing of geopolitical tensions.
An impressive 84% of S&P 500 companies have beaten earnings expectations, the strongest performance since 2021. Meanwhile, a strong April jobs report showing 115,000 jobs added signaled that the broader economy is successfully navigating higher inflation sparked by the Iran conflict.
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At the center of this bull run is the technology sector, which continues to dominate market performance as the main beneficiary of a huge capital investment boom of more than $700 billion in artificial intelligence. Tech stocks, particularly the “Magnificent Seven” such as Nvidia (NVDA) and semiconductor giant AMD (AMD), are fueling much of the latest optimism.