Major tech stocks are rallying, carrying the S&P 500 Index to notable gains, but it is coming at the cost of an unhealthy overall stock market.
Key Details
- The stock market has faced economic uncertainty and stress this year, reflected by two significant rallies for the S&P 500 Index in early February and late March.
- Seven stocks have concentrated the core of the most recent rally—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla—collectively gaining $2.1 trillion in growth as of Thursday, 88% of the S&P 500’s gains, Forbes reports.
- One LPL Financial strategist, Jeffrey Buchbinder, warns that this is a negative sign for the rest of the stocks on the S&P 500’s indexes, warning clients that hope for valuation recovery is limited when only a handful of stocks are performing well.
- The remainder of the market may well bottom out in the coming months, warns one Morgan Stanley analyst.
- These seven stocks reflect 29% of the S&P 500’s total value, as opposed to 25.6% at the end of last year.
Why Its News
High inflation, high interest rates, recession fears, and multiple bank crises in March have resulted in a stressed economy, with the tech sector signaling negative indicators for the economy through its mass layoffs from November to February. This came at the end of a poor-performing year for tech, with Nasdaq Composite Index declining 33% and companies announcing significant losses.
The tech layoffs have had a positive impact on the valuation of major companies. As we previously reported, tech stocks have seen notable gains in the past four months. Companies like Meta took advantage of the rally to buy back stocks, drawing the ire of President Joe Biden.
Apple has seen the biggest market capitalization, with a growth of $549 billion, while the other six companies have seen 20% year-to-date increases, Forbes notes.
