The stock market is at a critical juncture. Wall Street is convinced it will resolve in the bulls' favor — SkimNews
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- S&P 500 breadth has deteriorated to its weakest level since the DotCom Bubble by Goldman Sachs's preferred measure, with the median stock in a 16% drawdown while the headline index sits just below a record high.
- Goldman Sachs's Lee Coppersmith said the narrowness isn't a warning sign for the broader market and continues to favor SPX higher over the next 1-3 months.
- Deutsche Bank downgraded the tech sector Monday over crowded positioning and a high earnings hurdle, but predicted rotation into other sectors and small caps would ease breadth concerns.
- Morgan Stanley's Mike Wilson said the de-rating in the average stock has run ahead of any earnings deterioration, leaving room for a catch-up if Treasury yields stabilize.
- Only 34% of large-cap stocks have beaten the S&P 500 over the past 12 months, per Trivariate Research — near the low end of its historical range.
- Apple and Meta gains on Monday offset losses in Nvidia and Micron almost to the penny, keeping the S&P 500 nearly unchanged — a textbook illustration of the narrow leadership.
- Bank of America data shows median-company earnings growth outside tech, the Mag 7, and energy slowing to 7% in Q3 from 12% in Q2, complicating the broadening thesis.
Why it matters: The catch-up trade hinges on a dual dependency: the 10-year Treasury's recent crest above 5.3% needs to hold, AND broad earnings need to stop decelerating — with BofA already showing median growth sliding from 12% to 7% quarter-over-quarter. If the index keeps grinding higher without breadth repair, Macro Risk Advisors' Kolovos warns the disconnect becomes harder to sustain and drags tech down with it.
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