There are some strange things going on in the stock market that have investors worried.
On one end, we have a small handful of companies driving stock market gains.
The Wall Street Journal, using data from JonesTrading, reported on Sunday that only six companies — Amazon, Google, Apple, Facebook, Netflix, and Gilead Sciences — have accounted account for more than half of the $US664 billion in value added to the Nasdaq this year.
The Journal also reported that Amazon, Google, Apple, Facebook, Gilead and Walt Disney together account for more than all of the S&P 500’s $US199 billion in gains this year.
Year-to-date, the Nasdaq is up 6.5% while the S&P 500 is up just 0.5%. The Dow Jones Industrial Average, is down 2%.
“The concentrated gains are spurring concerns that soft trading in much of the market could presage a pullback in the indexes,” The Journal wrote.
“Many investors see echoes of prior market tops — including the 2007 peak and the late 1990s frenzy — when fewer and fewer stocks lifted the broader market.” The NYSE and the Nasdaq currently both have more stocks that are falling than rising, which in the past has occurred before downturns.
Josh Brown of the Reformed Broker pointed out on Monday that participation, or stocks also gaining along with the broader market, is the lowest it’s been since October 2007.
CNBC’s Jim Cramer is also concerned about the condition that he labelled “FANG” several years ago.
The acronym stands for “Facebook, Amazon, Netflix, Google,” and is used to describe the situation when these few select internet stocks have massive gains on their own, leaving the rest of the market behind.
“FANG is bad. It’s masking everything,” Cramer said Monday on CNBC. “When you have these stocks that are up 100 points, what it says is there’s nothing else to buy.”
So what does it mean that enormous gains by a few stocks are overshadowing the losses of many stocks?
Well, there’s no way one can definitively say that this is a bearish sign for stocks, but many are taking it as a sign that something will happen. Soon.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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