The standard index gained 2.82% in three months; weighting every member equally turns that into a 1.67% loss. On Wednesday, NYSE stocks at new lows outnumbered those at new highs by about 11 to 1 as the index rose.
Measured by the index, the third quarter was a good one for U.S. stocks. Measured by the typical stock, it was a losing one.
With one session left, the S&P 500 is up 2.82% for the quarter. The equal-weight S&P 500, which counts each member the same regardless of size, is down 1.67%. The 4.5-point spread between them sums up the quarter: a small group of very large companies, mostly in technology, carried the index while most of its members lost ground.
September widened it. The equal-weight index is down 4.4% for the month, its weakest since March, while the standard index is set to finish higher. Chipmakers did much of the carrying, with the PHLX Semiconductor Index headed for a monthly gain of about 9.9%.
Wednesday in miniature
The last day of the month repeated the pattern. The S&P 500 was up about 0.3% at 7,694.65 in the afternoon, with its technology sector up about 1.3%, and the Nasdaq Composite gained about 0.8%. The Dow Jones Industrial Average was down about 0.4% at 51,150.46, with Caterpillar and Goldman Sachs accounting for about 128 points of the decline at one stage.
Under the surface, it was a down day. The NYSE had 262 stocks at fresh 52-week lows and just 23 at new highs, a ratio of about 11 to 1, with decliners ahead of advancers 1,478 to 1,154. The Nasdaq count was 294 new lows to 84 new highs. Participation was light: NYSE volume ran at about 52% of its 30-day average, Nasdaq volume at 69%.
The Nasdaq shows the pattern from another angle. The composite set two records in September and was up about 2.6% for the month, yet it declined in 11 of 21 sessions, and on no day this month did stocks at 52-week highs outnumber those at 52-week lows. Aug. 27 was the last day they did.
The laggards
Financials have done the worst. The sector's SPDR fund lost 7.1% in September and declined in 17 of 21 sessions, which would make this its weakest month since March 2023, when it dropped 10%. Bank investors began the month worried that a flatter curve would pinch lending margins. The 10-year-to-two-year spread has since widened to about 41 basis points, so the curve alone doesn't account for the decline.
Smaller companies are under pressure too. The Russell 2000 sits almost 10% below its mid-August peak.
Calm on the surface
Options prices remain subdued. The Cboe Volatility Index was near 15.8, below its long-run average of about 19.5. Jonathan Krinsky, technical strategist at BTIG, noted that the VIX has split from a credit-default-swap index on high-yield borrowers that is at its highest since April. "VIX looks underpriced here relative to the breakout we're seeing in CDX," he said.
What would close the gap
The equal-weight index is the measure to watch as the fourth quarter opens Thursday. If it starts outperforming the standard index, the rally is broadening. If the gap keeps widening, gains will lean even harder on the chip trade, which Micron's results after Wednesday's close will test. Friday's payroll report bears on the rates that have weighed on banks, real estate and small caps.