The latest market intelligence from JPMorgan suggests that the rally in the S&P 500 (SPX) yesterday was largely driven by three MegaCap Tech stocks – NVIDIA (NVDA), Analog Devices (AVGO), and Oracle (ORCL). According to the report, these three stocks collectively accounted for 58% of the SPX’s total return, with the remaining 42% coming from the rest of the index.

Interestingly, the performance of these MegaCap Tech stocks was not uniform across the board. While NVDA and AVGO saw gains of 3.5% and 2.7%, respectively, ORCL lagged behind with a loss of 0.8%. This disparity highlights the significant impact that individual stock performances can have on the broader market index.

Excluding these three MegaCap Tech stocks from the SPX, the index level would have been down 50bp yesterday. This demonstrates the outsized influence these select stocks have on the overall performance of the index.

The report also notes that this concentration of returns among a small number of stocks is not unprecedented, but it does highlight the potential risks associated with heavy reliance on a limited number of stocks for market performance. As investors, it’s essential to be aware of these concentrations and to diversify our portfolios accordingly to minimize risk.

While MegaCap Tech stocks drove the SPX rally yesterday, it’s important to recognize that their performance can be inconsistent and may not always mirror the broader market trend. By diversifying our investments and paying attention to individual stock performances, we can better manage risk and navigate the complexities of the stock market.