The Stock Market’s Drop Is Worse Than It Looks. Here’s Why.

Those drops aren’t pleasant, but the pain is even worse under the surface. Just 50 stocks in the S&P 500 are 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, 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.

When the S&P 500 is having 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 seems to be the case on Wednesday. The small-company Russell 2000 has 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, has fallen 1.4%. Tesla (TSLA), Alphabet (GOOGL), and Exxon Mobil (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.

it’s exactly the kind of rally you don’t want to see when the stock market is trying to find a bottom. And it’s the kind of day that’s 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.”

Still.

Write to Ben Levisohn at ben.levisohn@barrons.com