Tags: USA Today | stocks | market | investing

USA Today: Stock Market Gains Stand on Narrow Shoulders

USA Today: Stock Market Gains Stand on Narrow Shoulders
(Photo illustration: Dollar Photo Club/Rob Williams)

By    |   Thursday, 12 November 2015 06:00 AM

Stocks last month rebounded from a correction, but much of the gain can be attributed to a handful of companies, which is a worrisome sign, writes Adam Shell in USA Today.

“Wall Street views stock rallies driven by a smaller and smaller pool of winning names as a sign of market weakness, lack of leadership and a dearth of strength under the surface of the broader market,” he writes.

Stocks fell more than 10 percent in August from the May peak as China devalued the yuan, triggering investor fears that the world’s second-biggest economy was in trouble. The market rebounded in October as central banks worldwide discussed stimulus plans.

The drivers of the rally include Amazon.com (up more than 100%), Microsoft (up nearly 20%), Google parent Alphabet (up more than 40%) and Apple (nearly 10% higher), according to data from Strategas Research Partners and S&P Capital IQ show.

“The 10 largest stocks in the S&P 500 have contributed more than 100 percent of the year’s roughly 2 percent gain" heading into this week’s trading, Chris Verrone and Todd Sohn, analysts at Strategas Research Partners, said in a note cited by Shell. "By comparison, both 2013 and 2014 saw the 10 largest stocks contribute less than 20 percent of the year’s advance.”

The 10 biggest stocks  in the index accounted for just 19 percent of the gains last year and 15.2 percent of the index’s return in 2013.

“The term “Nifty Fifty” was born back in the late 1960s when a handful of growth stocks, such as IBM, Polaroid, McDonalds, drove the market up to dizzying heights before falling hard and wringing out all the exuberance in the 1973-74 bear market,” Shell writes. “A handful of hot tech stocks back in 2000 also drove the Nasdaq to dizzying heights before the tech stock crash.”

The S&P 500’s 1 percent decline on Monday is a warning sign of steeper drops ahead regardless of whether the Federal Reserve raises interest rates, says Irwin Kellner, chief economist at MarketWatch.

“Stocks face the future wedged between a rock and a hard place. If the Fed hikes interest rates, stocks will fall, fearing the loss of an important prop under prices as well as under the economy,” he writes. “On the other hand, if the Fed should decide not to raise rates at this time, stocks will also fall over concerns that the economy is too weak to take a hike in rates.”

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
StreetTalk
Stocks last month rebounded from a correction, but much of the gain can be attributed to a handful of companies -- a worrisome sign, writes Adam Shell in USA Today.
USA Today, stocks, market, investing
409
2015-00-12
Thursday, 12 November 2015 06:00 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved