The S&P 500 fell more than 1% on Thursday, its worst day since July, even though more than 300 of its stocks finished higher. AI stocks fell while many other stocks rose. Strategists offer both upbeat and downbeat readings of the split.
The S&P 500 fell 1.21% on Thursday, its worst showing since July. Yet more than 300 individual S&P 500 stocks finished higher, a divergence between the index and its members not seen since January 2025, according to Dow Jones Market Data.
AI stocks drag the index lower
Consumer-staples names such as General Mills and Campbell's rose 8.01% and 8.69%, but that was not enough to offset losses in popular AI stocks. The PHLX Semiconductor Index fell by more than 6%, leaving it down more than 26% from its June peak and in bear market territory.
Mark Hackett, chief market strategist at Nationwide, said trading in 2026 has started to resemble a seesaw, with AI stocks on one side and everything else on the other.
Concentration explains the divergence
The 10 largest stocks in the S&P 500 account for roughly 40% of the index's total market capitalization. Because the index is weighted by market capitalization, the more valuable the stock, the bigger its pull on the daily direction.
The equal-weighted S&P 500 was on track for a weekly gain as of Thursday's close, while the semiconductor index was headed for a decline. Barring a sharp shift on Friday, it would be the eighth straight week the two moved in different directions, the longest such streak on record in data going back to the mid-1990s.
Strategists read the rotation differently
Farzin Azarm, a managing director of equities trading at Mizuho Americas, said investors are moving money around within the market rather than pulling it out, and called the de-grossing by hedge funds a good sign.
BTIG's Jonathan Krinsky took a more downbeat view. The S&P 500 has moved opposite to most of its members on more than 30% of trading days in 2026, the most in any calendar year going back to 1996. According to Krinsky: "At some point, we believe the constant rotation stops and we see a higher-correlation selloff."
Source: MarketWatch
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