The S&P 500 is within 0.2% of its all-time high, but the rally is a mile wide and an inch deep. Only a handful of megacap AI winners are doing the lifting, while the vast majority of the index's members are trading well off their own records.
New data shows 84% of S&P 500 stocks are at least 10% below their all-time highs. More than four in ten—41%—are down over 30%, and 17% have been cut in half. The index itself closed above 7,800 for the first time on October 6, and it hasn't looked back.
The math of a top-heavy index
The S&P 500 is market-capitalization-weighted, meaning the biggest companies carry the most influence. Nvidia, Apple, and Microsoft alone account for roughly one-fifth of the entire index. When those three move, the S&P 500 moves—regardless of what the other 497 stocks are doing.
Kevin Gordon, Schwab's head of macro research and strategy, points to AI stocks as the main support. The average S&P 500 member has fallen 14% peak to trough since early August, he said.
Sector pain is widespread
The split is brutal by sector. Real estate is the worst: 97% of its S&P 500 stocks are at least 10% below their highs. Materials (96%), utilities (94%), and consumer discretionary (92%) follow. Energy is the relative bright spot at 62%, while healthcare sits at 70% and information technology at 72%.
Real estate stocks hit a record low against the S&P 500 last week. Part of that pressure comes from the bond market. Longer-dated Treasury yields hit 24-year highs on October 7, a headwind for rate-sensitive sectors like real estate and utilities.
A narrow rally built on AI capex
Goldman Sachs' ex-AI index—which excludes AI enablers—gained 6.7% in the six months to October 6. The S&P 500 rose 18.3% over the same stretch. That gap tells the story: strip out the AI trade, and the market looks far less impressive.
Gordon warned that a single mega-cap capex miss—a shortfall in AI spending paired with pared-back budgets—could disrupt earnings and shake the index's narrow foundation.
Third-quarter reports from the largest AI spenders are due in the coming weeks. Those numbers will show whether the narrow base holds or starts to crack.
