The S&P 500 just hit a record closing high on October 6. The next day, small-cap stocks fell by about 1.3%.
The market is now talking about SPY—not just whether the index can keep rising, but how broad this rally really is. Over the holiday, both the S&P 500 and the Nasdaq hit new highs, with technology and AI-related stocks serving as the main drivers. But by October 7, the Russell 2000 clearly pulled back, even as the pressure on large caps appeared relatively smaller.
Some people also say that related U.S. equity perpetual contracts gave back part of the gains from the prior two days before their October 7 pullback; the exact magnitude is still to be verified. It’s a reminder: making new index highs doesn’t necessarily mean the related contracts will keep tracking higher, and it also doesn’t mean risk appetite has spread to all stocks.
This conclusion could also be wrong in how much weight it puts on one day’s small-cap selloff. If the upward breadth expands again, the current divergence may just be a temporary rotation. Do you think SPY’s new high reflects a healthy rally led broadly by leaders, or is it a prosperity propped up by only a handful of large-cap stocks?
The market is now talking about SPY—not just whether the index can keep rising, but how broad this rally really is. Over the holiday, both the S&P 500 and the Nasdaq hit new highs, with technology and AI-related stocks serving as the main drivers. But by October 7, the Russell 2000 clearly pulled back, even as the pressure on large caps appeared relatively smaller.
Some people also say that related U.S. equity perpetual contracts gave back part of the gains from the prior two days before their October 7 pullback; the exact magnitude is still to be verified. It’s a reminder: making new index highs doesn’t necessarily mean the related contracts will keep tracking higher, and it also doesn’t mean risk appetite has spread to all stocks.
This conclusion could also be wrong in how much weight it puts on one day’s small-cap selloff. If the upward breadth expands again, the current divergence may just be a temporary rotation. Do you think SPY’s new high reflects a healthy rally led broadly by leaders, or is it a prosperity propped up by only a handful of large-cap stocks?