The high price in the S&P 500 Index, 2127.83, was reached on May 15, 2015. Over the following 9 months, the S&P 500 declined 14.04% with low price being reached on February 11, 2016. Since that day, the stock market index has rallied 11.56% through the close of trading on March 17, 2016. But how do we weigh the S&P 500 performance during this rally?
Well, as a professional market participant, I have a keen interest in the composition of index performance in both up and down price performance regimes. One question in particular that I try to answer is: What is the quality of the move?
Specific to the recent stock market rally, is it mere “short-covering” or has something fundamentally changed to warrant an upward-repricing of equities?
The following table decomposes the index performance for the time periods mentioned above: market correction vs market rally.
S&P 500 Performance Composition
- 78% of the constituents declined during the index correction, averaging -24.11%.
- Of the 381 constituents that declined, 29 suffered declines <= -50%.
- The index-rally from the low has been led by the constituents that declined the most during the sell-off; one sign of short-covering.
- 13 stocks that rallied >=25% during the index sell-off, and have continued to rally, include the following:
CSC – Computer Science Corp (+75.98%)
HRL – Hormel Foods (+59.80%)
CVC – Cablevision Systems (+58.68%)
TSN – Tyson Foods (+58.02%)
TE – Teco Energy (+49.70%)
CPB – Campbell Soup (+40.38%)
ARG – Airgas (+39.42%)
GOOGL – Alphabet Inc. (+38.09%)
RAI – Reynolds American (+37.85%)
FB – Facebook (+37.69%)
GOOG – Alphabet Inc. (+37.30%)
O – Realty Income Corp. (+35.29%)
GAS – AGI Resources (+32.49%)
What macroeconomic inferences can be drawn from the fact that, of the 13 stocks that outperformed, one makes soup, two make canned/frozen meat, one makes cigarettes, one provides television services, and three provide online media services? Draw your own conclusions.
Thank you for reading.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.