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S&P 500 BREADTH GAP HITS 35-YEAR HIGH AS MEGACAPS LEAD

The S&P 500 and the Nasdaq have notched all-time highs thanks to AI-optimism and strong earnings, but the rally remains notably narrow, with tech megacaps doing most of the heavy lifting.

UBS analysts note that in the six weeks to May 15, the market-cap-weighted S&P 500 .SPX beat its equal-weighted counterpart .SPXEW by the widest margin in at least 35 years.

Given how much value has been driven by megacap AI names, UBS recommends trimming outsized positions and guarding against concentration risk.

They add that markets could take a breather as earnings draw to a close and focus returns to the unresolved situation in the Middle East.

Swissquote Bank's Ipek Ozkardeskaya says she has been watching market breadth with much of the gains concentrated in a handful of tech companies that are "priced at perfection."

"If anything goes wrong in terms of their pricing then we could see a meltdown which would look like a bubble burst," the senior market analyst said.

Shares of AI bellwether Nvidia NVDA.O were up 0.5% after targeting second-quarter revenue above Wall Street estimates and announcing an $80 billion share repurchase program.

(Twesha Dikshit)

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