Not since the dot-com bubble have stocks thrown up this concerning metric
Markets have been volatile beneath the surface.
For some time now it has been a feature of the U.S. stock market that a seemingly relatively serene S&P 500, currently sitting less than 1% from record highs, has contained some frantic and disturbing action beneath the surface.
And the worrying signals keep coming, according to Jonathan Krinsky, technical analyst at BTIG. In a note published over the weekend titled "Something's gotta give," he argues that it's not just equity market characteristics that are "unsustainable" but there are concerning developments in credit, too.
The main issue he addresses is the lack of market breadth. In simple terms it means that the equity market's rally tends to be driven by a narrow group of stocks. Recently, for example, there has been a resurgence of many of the Magnificent 7 cohort of big tech.
Yes, it's a trend that's been concerning more bearish investors for a few years, but now Krinsky has spotted a bad breadth signal that has delivered metrics not seen in a quarter of a century.
The S&P 500 SPX at the end of last week contained only 47.8% of its components above their 200-day moving average. At the same time the index closed very close to a 12-month peak.
Krinsky calculates that there's been only 25 other days "that had less than 50% of S&P 500 stocks above their 200-DMA and the SPX itself was closer to a 52-week." All of those took place between 1998-2000, in the run-up to the dot-com crescendo.
Taking the breadth issue further, Krinsky notes that there have just been nine consecutive days when S&P 500 constituent 52-week lows were greater than 52-week highs, and the index was within 2% of its recent peak. That's only happened three times since 1990, he says: in December 1999; January 2000; and now.
Source: BTIG
Krinsky provides a reminder of what happened in 2000. From July 1999 through February 2000, the equal-weighted S&P 500 index XX:SP500EW RSP, which removes the outsized heft of market-leading big tech stocks, fell 16% while the market-cap weighted S&P 500 proper added 8%.
But they then reversed, with the S&P 500 falling 17% into late December that year, while the equal-weighted S&P 500 rose 20% as investors moved away from the erstwhile high-flying technology stocks.
So far the broad market has proved stoic. Krinsky notes that it's now been 213 trading days since the New York Stock Exchange registered an 80% or more downside volume day - likely because investors keep shifting to and from sectors. The average calendar year contains 21 such days, and there's never been a year with fewer than five, he adds.
"While the constant rotation has kept us from seeing a correlation-one selloff, we continue to think the clock is ticking, and we see one sooner than later," says Krinsky.
Source: BTIG
He's wary about parts of the credit markets, too, spotting that the spread between investment grade and high yield bonds are widening, traditionally a forecast of rising economic stress. "They are back to the wides of the summer when SPX was closer to 7,300," says Krinsky.
Furthermore, the costs of insuring high-yield debt of the technology sector, via credit default swaps, are back at levels seen in the spring, while investment-grade tech CDS are at their highest since 2023, he notes.
For investment opportunities to keep an eye on, Krinksy highlights consumer discretionary stocks, which have been hard hit of late by the surge in oil prices and bond yields. "Structural issues remain, but if there is any sort of resolution in the Middle East it's also the group that likely rebounds the hardest," he says.
His bounce candidates in this regard are Burlington Stores $(BURL)$, Brinker International (EAT), Yeti Holdings $(YETI)$, and Acushnet (GOLF), all of whose shares have fallen notably but "are coming into strong support levels," Krinksy concludes.
The markets
U.S. stock-index futures (ES00) (YM00) (NQ00) are lower as Treasury yields BX:TMUBMUSD10Y rise. The dollar index DXY is a tad higher and gold futures (GC00) are sliding to around $4,180 an ounce.
Key asset performance Last 5d 1m YTD 1y S&P 500 7743.41 1.21% 0.41% 13.12% 16.55% Nasdaq Composite 27,068.72 2.06% 2.52% 16.46% 20.39% 10-year Treasury 5.233 27.70 47.70 106.10 108.90 Gold 4179.3 -4.60% -7.07% -3.53% 8.19% Oil 95.52 3.86% 10.67% 66.38% 51.19% Data: MarketWatch. Treasury yields change expressed in basis points
Take control of your news. Make MarketWatch your preferred source on Google.
The buzz
Oil prices (CL.1) (BRN00) are on the rise again after U.S. President Donald Trump rejected an Iranian proposal to end the war and re-open the Strait of Hormuz.
Federal Reserve officials speaking on Monday include governor Lisa Cook at 1:25 p.m. Eastern, and Richmond Fed president Thomas Barkin at 1:30 p.m.
Earnings highlights this week are likely to be Micron Technology (MU) on Wednesday and Nike (NKE) on Thursday.
New Jersey datacenter fined $1.1 million after visual investigation showed dozens of unpermitted generators..
The chart
Source: Apollo
Torsten Slok, Apollo's chief economist, points out that many fintech companies are offering significantly higher yields for depositors than the banking sector. "Muse and similar agentic AI assistants could soon sweep household cash automatically into accounts paying 3.3% to 5.0%, instead of the 0.1% national average on checking accounts," says Slok. "If every household used AI agents to optimize the return on their cash balances, banks could lose a large share of the cheap deposits they rely on to make loans, which would be a problem for the entire financial system." he adds.
Top tickers
Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.
Ticker Security name NVDA Nvidia TSLA Tesla MU Micron Technology AMZN Amazon.com SPCX SpaceX GME GameStop AMD Advanced Micro Devices META Meta Platforms AAPL Apple MSFT Microsoft
-Jamie Chisholm