When only a few stocks drive the market’s performance

The Wall Street Journal ran an article this week called “The Only Six Stocks That Matter” about this year’s market gains being concentrated in just a few stocks.

About half the gain in the Nasdaq this year (up over 7% YTD) has been from just six stocks -- Amazon.com, Google, Apple, Facebook, Netflix, and Gilead Sciences.   And five large stocks -- Amazon, Google, Apple, Facebook, Gilead, and Walt Disney – have accounted for more than all of this year’s gain in the S&P 500.

We’ve seen big stocks wield big influence before.   In 2012, a surging Apple got so large that it started singlehandedly swaying the index.  S&P index analyst Howard Silverblatt said at the time, “Nothing in modern times has moved anything like this.”  

Meanwhile the number of stocks hitting new lows has been growing, which makes it an uneasy time for investors.    The divergence in individual stock performance doesn’t necessarily mean a market shift is coming – the other possibility is that good performance becomes more widespread.  But the big can’t keep getting bigger while the cheap keep getting cheaper.