Suddenly it looks like the Magnificent Seven are losing some of their shine.
While it's difficult to draw such conclusions from a single trading session, something remarkable happened in the U.S. stock market on Monday that caught Wall Street's attention and raised new questions about the future leadership of the U.S. stock market.
All three major U.S. stock indexes closed at new 52-week highs, with the Dow Jones Industrial Average DJIA closing at its highest level in nearly two years. Nevertheless, not a single member of the “Mag 7” ended up in the green zone. Instead, they were all deep in the red, with every member of the elite group of megacap technology stocks closing at least 1% down, except Microsoft Corp.
MSFT
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How unusual is that? It turns out that it's extremely rare for the Nasdaq to finish higher without the help of its most heavily weighted stocks.
Monday's session marked just the second time since Facebook parent Meta Platforms Inc.'s market debut in 2012 that the Nasdaq-100 NDX closed in the green, while all seven “Mag 7” stocks closed in the red, according to Dow Jones Market Data. The last time this happened was on November 9, 2016, the day after Donald Trump's surprise victory over Hillary Clinton in the US presidential election.
Also notable is that the PHLX Semiconductor Index SOX, a closely watched indicator of semiconductor industry performance, fell on Monday without help from Nvidia Corp. reached a new record high.
NVDA
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The darling of artificial intelligence, which has seen a boom in sales and whose stock price rose more than 200% this year.
The PHLX semiconductor index SOX rose 3.4% to close at 3,902.38 on Monday. The Magnificent Seven includes seven of the most valuable companies trading in the US: Meta Platforms
META
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Apple Inc.
AAPL
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Nvidia, Microsoft, Amazon.com Inc.
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Alphabet Inc.
GOOG
GOOGL
and Tesla Corp.
TSLA
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The fact that all of this is happening now makes it even more remarkable, market strategists said.
As the end of the year approaches, investors are trying to predict who the new stock market leaders might be in 2024 after a year of investment returns dominated by just seven stocks.
“Considering the Mag 7 is over 40% of the weight of the Nasdaq 100, it's pretty amazing that NDX is up,” said Steve Sosnick, chief market strategist at Interactive Brokers, during a phone interview with MarketWatch. “It is untenable to believe that there could be a market in which seven stocks lead pretty much everything. At some point you have to hope that the other 493 [members of the S&P 500] catch up.”
However, Sosnick cautioned against interpreting Monday's moves as an indication that the long-awaited rotation of industry leadership is underway, just in time to keep the bull market going in 2024.
To be sure, market breadth was quite strong on Monday, which likely helped offset some of the drag from Mag 7. On the Nasdaq-100, 87 stocks closed higher, the most in a single day since 90 on Nov. 20.
In the S&P 500, 366 stocks rose, the most since December 1, according to Dow Jones data. The Russell 3000 RUA, which tracks the entire U.S. market, rose 0.4% to close at 2,652.24, its highest since April 2022, according to Dow Jones data. Meanwhile, defensive sectors in the S&P 500 underperformed, according to FactSet data like consumer staples perform better.
Still, the big action on Monday remained in semiconductors, which got a big boost from a 9 percent rise in Broadcom shares
AVGO
That brought its shares to a new record of just under $1,030.
Semis aren't exactly a laggard. According to FactSet data, the aforementioned Philly semiconductor index is up more than 54% year-to-date.
“Investors remain passionate about technology. Now it looks like they’re focused on the next tier of tech stocks.”
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