The stock market has had two bad days—and the damage is even worse than it looks.
The damage is bad enough on the surface. The Dow Jones Industrial AverageDJIA –1.94% fell 1.9% on Thursday after declining 0.8% on Wednesday, while the Nasdaq CompositeCOMP –2.75% declined 2.8% on Thursday after falling 0.7% on Wednesday, and the S&P 500SPX –2.38% dropped 2.4% on Thursday after declining 1.1% on Wednesday.
Those drops aren’t pleasant, but the pain is even worse under the surface. On Wednesday, just 50 stocks in the S&P 500 were higher on the day, a dismal reading on market breadth. In fact, on days when fewer than 100 stocks finished the day in the green in 2022, the S&P 500 has dropped an average of 2.2% and a median of 1.9%. That’s basically twice as much as the S&P 500 was down. When fewer than 50 stocks were up on the day, the S&P 500 averaged a 3.5% drop.
Thursday’s drop was also muted compared with damage under the surface. Just 24 stocks finished higher on the day, Including NXP Semiconductors (NXP), which rose 4%, and Pool Corp . (POOL), which advanced 2.3%. On days when fewer than 25 stocks have risen in 2022, the S&P 500 has averaged a 3.5% drop and a median decline of 3.6%.
When the S&P 500 had a “better” day than the typical stock in the market it’s usually a sign that big stocks are doing better than small, and that was the case on Wednesday. The small-company Russell 2000 dropped 1.8% today, while the Invesco S&P 500 Equal Weight ETF (RSP), which gives big and small stocks the same weighting in the fund, fell 1.4%. Tesla TSLA –0.89% (TSLA), Alphabet (GOOGL), and Exxon Mobil XOM –2.16% (XOM)—with market caps above $450 billion—were among the stocks that finished higher on the day, while Carnival (CCL), Expedia (EXPE), and trucking company J.B. Hunt (JBHT)—with market caps less than $21 billion—were among the biggest losers.
These are exactly the kind of days you don’t want to see when the stock market is trying to find a bottom. And they’re the kind of days that serve as a reminder that the stock market is still in a bear market, despite the recent rally. “Although the S&P 500 has so far escaped a traditional bear market based on the level of the index using closing prices, the weakness under the surface is clearly in bear market territory,” writes Liz Ann Sonders, chief investment strategist at Charles Schwab .