Market leaders have been losing ground lately, with many top-performing stocks declining sharply. According to 22V Research strategist Jeff Jacobson, this trend could be a negative sign for the broader market. Jacobson pointed out that some of the best-performing stocks in the market declined significantly last week, including Robinhood and DraftKings.
Other leaders under pressure include JPMorgan, Goldman Sachs, and Palantir, which have all underperformed the S&P 500’s modest gain over the past five sessions. Meta, after a stunning run of gains, saw its worst week since July, with a drop of 7.2%.
Jacobson warned that if the largest, best-performing names lose their market leadership, it may be hard for indices to make new meaningful highs in the short-term. The negative price action comes at a seasonally weak period and ahead of several key catalysts, including Nvidia earnings and inflation reports.
The “Magnificent Seven” trade, which includes Meta, Amazon, Google, Apple, Nvidia, Microsoft, and Tesla, has been a mixed bag this year. Only one stock, Meta, has meaningfully outperformed the S&P 500, while others have generally hovered around the index’s 4% gain.
Some pros argue that traders are reading too much into the weakness of market leaders, citing spectacular earnings for many of these companies. Navellier & Associates founder Louis Navellier remains bullish on Nvidia despite the recent decline.
Source: https://finance.yahoo.com/news/theres-an-ugly-trend-developing-in-the-stock-market-173015701.html