On Wednesday, the S&P 500 shed 2.3%. As we noted on X, that snapped a 356-trading day stretch without seeing a one-day decline of at least 2%. The major key to this weakness, which we detailed in last night's Closer, was how the Magnificent 7 had a historically bad session given poor reactions to earnings of Tesla (TSLA) and Alphabet (GOOGL). Those declines on earnings were a drag on the rest of the mega-cap space and in turn the broader index. Yesterday was another example of the topic that has consistently been discussed in recent years in which the concentration of the largest stocks in the S&P 500 had an outsized impact on the index's moves regardless of what the rest of the market has done.

Delving deeper into yesterday, in the chart below we show all days where the S&P 500 fell at least 2% since 1990 and compare those price moves to each day's daily net advance decline reading (this is the number of stocks that rose on the session minus the number that fell). While it may not come as any surprise, typically when the S&P has fallen 2% or more, the number of declining stocks drastically outnumbers advancers. In fact, on a median basis, these days have typically seen a meager 33 stocks finish the day higher versus 465 decliners (median net daily advance-decline reading of -432).

Looking back on this sample of down days, if overwhelmingly weak breadth is the rule, yesterday was an exception. In spite of the over 2% decline, nearly a third (165) of the S&P 500's members finished Wednesday with a gain. That is a five times stronger daily breadth reading than what has been the norm historically! That also made for a daily net advance/decline reading of -171 which ranks as the fifth strongest of any day since 1990 when the S&P has fallen at least 2%. The most recent examples prior to yesterday in which the market fell on such strong (albeit negative) breadth were all the way back in November and October of 2000. There was another instance of even better breadth on a +2% decline in May of 2000, and in April of that same year, there were even a pair of days when the S&P 500 managed to fall by that much on positive breadth! We haven't seen this kind of price versus breadth action for the S&P 500 since the Dot Com Bubble was bursting.

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