Is the market rally over now that Netflix's momentum is slowing? You can hear the bears and short sellers licking their chops already: Netflix's miss on new subscribers means further gains are doubtful not just for FAANG stocks, but even the S&P 500.
The bears' logic goes like this: Most of the gains in the S&P 500 are due to FAANG stocks, the technology giants including Facebook, Amazon, Apple, Netflix and Google's Alphabet. With Netflix now faltering, momentum players that have advanced the FAANG stocks will begin lightening up on their positions. The bears conclude the S&P 500 is in trouble now without FAANG.
I agree that much of the gain in the S&P 500 this year is due to the advance of those tech names, but to say it all depends on FAANG is ludicrous.
There are plenty of bright spots in the market outside of this handful of big tech stocks. With the S&P 500 up 4.6 percent year-to-date, 260 stocks, or 52 percent of the index, are up this year. That's not amazing breadth, but it is positive. "What you don't want to see is where the market is up, and the breadth is negative," Howard Silverblatt said.
Four sectors — technology, health care, energy and consumer discretionary — had a particularly strong year, with far more than half the stocks up in each sector.