Understanding Market Breadth: S&P 500 Internals and Bull Market Performance

The S&P 500 closed down 0.4% with 49 stocks closing higher and 453 lower, the worst showing for a loss this small in three decades. Market breadth refers to the number of stocks participating in a move, with various measures to gauge it. The S&P 500's current bull market has weak internal strength, with only 50% of stocks above the 200-day moving average, a historically low level. This reflects the dominance of mega-cap stocks, but the lack of breadth is concerning after a near-bear market miss.

The S&P 500 closed down 0.4% on July 2, 2025, with 49 stocks closing higher and 453 lower, marking the worst showing for a loss this small in three decades. This narrow market breadth, where only 50% of stocks are above the 200-day moving average, reflects a historically low level of participation. This situation is concerning after a near-bear market miss and indicates that the current bull market lacks internal strength [1].

The dominance of mega-cap stocks in the S&P 500 is evident, with the top three holdings—Nvidia, Microsoft, and Apple—making up over 20% of the index. This top-heaviness has drawn attention and prompted BlackRock to introduce two new ETFs to reduce megacap exposure. The iShares S&P 500 3% Capped ETF (TOPC) and the iShares S&P 500 ex Top 100 ETF (XOEF) aim to provide investors with less exposure to these megacap tech stocks [2]. However, these new ETFs come with higher expense ratios and lack a long-term track record compared to the Vanguard S&P 500 ETF (VOO), which has generated an average annualized return of 16.6% over the past five years [2].

Despite the weak market breadth, Goldman Sachs remains bullish on the S&P 500, raising its year-end forecast to 6,900. The investment bank expects S&P 500 earnings to grow 7% this year and next, driven by solid consumer demand and robust performance from top-tier index constituents. Goldman Sachs highlighted Kohl's as a deep value play with a turnaround catalyst, while Intellia Therapeutics and Gogo Inc. are tied to structural trends driving outperformance [3].

In summary, while the S&P 500's bull market continues, concerns about weak market breadth and the dominance of mega-cap stocks persist. Investors should remain vigilant and consider diversifying their portfolios to mitigate risks.

References:
[1] https://www.tradingview.com/news/stockstory:b6ab95966094b:0-1-s-p-500-stock-with-promising-prospects-and-2-to-think-twice-about/
[2] https://finance.yahoo.com/news/blackrock-tweaking-p-500-formula-085500661.html
[3] https://www.ainvest.com/news/goldman-sachs-bullish-500-flags-3-stocks-watch-2507/