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The major indexes may have only chalked small gains Wednesday, but while the generals were sleeping, the soldiers were on the march.
At the vanguard, moderate losses in large-cap energy and financials were offset by outsized gains in the consumer discretionary sector — thanks principally to Amazon (AMZN) and Tesla (TSLA).
This seesaw theme has become a subtle but important market narrative. On days when AI isn’t leading the charge, select pockets of strength keep the S&P 500 from more pronounced sell-offs — which itself is holding index volatility near multiyear lows.
The recent “plunge” in Nvidia is instructive.
Only Monday, the AI poster child closed down 13% from its record high. Surveying social media, you would think Wall Street was burning.
But during that harrowing three-day slump, a funny thing happened: The Dow Jones Industrial Average (^DJI) — up only 3% this year versus 14% for the S&P 500 — staged a comeback. Energy perked up, and biotech jumped as forgotten pockets of the market showed signs of life.
This seesaw-offsetting behavior is everywhere right now in lieu of correlations between even stocks in similar sectors. Stocks simply do not want to move in the same direction.
“This is a generationally weird US stock market,” wrote Luke Kawa, a former director of investment solutions at UBS Asset Management Americas now at Sherwood Media.
Kawa was specifically referencing Tuesday’s price action, in which the S&P 500 managed a 0.4% gain despite 384 of its components closing in the red — a new feat for a data set that goes back to 1996.
Similar “firsts” have been dotting the market statistics recently.
But none of this detracts from the argument — supported by ample research and history — that it’s perfectly normal in a bull market to have gains concentrated in a few stocks.
Winning stocks that enjoy a secular-themed rally get bigger and bigger until the move runs its course.
In a bull market, when leading stocks falter, other…
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