The S&P is soaring, but fewer companies are setting record highs. Why that could be a red flag for the market

"Since 1972, the S&P 500 has shown below-average returns when its all-time high coincided with fewer than 100 NYSE companies hitting new highs."

"Just five stocks—Amazon, Broadcom, Meta, Microsoft, and NVIDIA—are providing over half of the S&P 500's total return, indicating narrow participation."

"When a market rally is driven by only a few companies, the risk of losses increases, particularly if these companies struggle."

"The median S&P 500 stock is trading about 12% below its 52-week high, while the index approaches a new high."

The S&P 500 has reached new highs, contrasting a sell-off in April, but analysts caution about the lack of broad company participation. Narrow market breadth indicates potential weakness; historical analysis shows below-average returns when fewer than 100 NYSE companies hit new highs alongside the S&P's peak. Currently, five major tech firms comprise over half of the index's returns, raising concerns about sustainability. Moreover, most S&P stocks remain significantly below their recent highs, highlighting a troubling disparity in market performance.

Read at Fortune