Market analysts who study trends in stock price moves and trading volume say that's a sign that investors lack conviction about the market, and could point to declines ahead. "A narrow market usually ends badly, although sometimes it takes a while to do so," said Byron Wien, director of investment strategy at Morgan Stanley.
In the past few months, the market has looked much like it did in the first three months of the year, when the largest stocks in the Standard & Poor's 500 and Nasdaq soared while many other stocks lagged. The market began to broaden in March, as out-of-favour energy and industrial stocks rallied. Declining and advancing stocks were about even on the Big Board. That trend dissipated as the summer approached, though, and for the past three months, about 200 more stocks have fallen each day than risen on the NYSE.
For the holiday-shortened week, the S&P 500 fell 0.4 per cent, the Nasdaq gained 1.5 per cent and the Dow Jones Industrial Average lost 0.5 per cent. The worst-performing groups in the S&P 500 included appliance, textiles, grocery store and banking stocks. Oil field services, newspaper and toy shares rallied.
Investors say a handful of stocks are rising consistently because those companies are exceeding Wall Street's profit expectations. "The 50 stocks that are delivering the goods are still delivering the goods," said Robert Bloom, chief investment officer for Friends, Ivory and Sime. As interest rates go up and the economy slows, he said, it makes sense that investors prefer fast-growing companies.
The S&P 500 has made little headway since April, bouncing between 1,300 and 1,400, partly because the Federal Reserve has raised interest rates twice and investors say that more increases are coming.
To get more stocks rallying, "we need the economy to slow down and take away the Federal Reserve's reason to raise interest rates," said Charles Blood, director of financial market strategy at Brown Brothers Harriman & Co.
Mr Wien said the central bank could raise short-term interest rates several more times in coming months. "That's a hostile monetary environment, and that's not good for equities."