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Microsoft, Nvidia, Apple and Meta supplied twice the S&P 500's third-quarter gain
Microsoft, Nvidia, Apple and Meta added about 300 points to the S&P 500 in the third quarter while the other members subtracted about 150. With roughly 311 stocks down, most of an index fund's money sat in the group that lost ground.
The Investor · Invest desk
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What happened
- Microsoft led the four, rising between 33% and 37.5% on encouraging earnings and growth in its Azure cloud business, according to Crypto Briefing.
- Meta gained between 18% and 28.7% on AI developments, while Nvidia rose about 13% to 14% and Apple between 13% and 15%.
- Energy posted the largest percentage gain of any sector, but technology's weight in the index gave it the bigger effect on where the S&P 500 ended.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- exposure S&P 500 fund holders now depend on four companies' results; if the AI trade cools or their earnings growth slows, the report warns, the weighting that lifted the index could magnify losses.
- constraint Utilities and real estate stay under pressure for as long as yields hold at multi-decade highs, because higher yields raise their borrowing costs and pull dividend investors toward bonds.
- decision Energy's percentage lead did little for index holders because the sector lacked weight, so capturing the quarter's best sector required holding more of it than a cap-weighted fund does.
Net of the rest of the market, the quarter's gain comes to about 150 points [1]. The headline figure agrees. A close between 7,651 and 7,666, 2% above where the quarter began, implies a start near 7,500 to 7,516, and 2% of that is about 150 points [4][1][1]. So the four stocks supplied about twice the index's gain, or rather all of it plus the half that the other members took back [2]. Every figure here comes from one Crypto Briefing report, and it gives several of them as ranges [4].
Whether that makes an S&P 500 fund a bet on four companies depends on what is being bet. The report does not include index weights, but its return figures put limits on them. The four added roughly 4% of the starting index level [2]. Their individual gains ran from 13% to 37.5% [6][7], so their weighted-average return sits inside that band. Divide 4% by each end and their combined weight at the start of the quarter comes out between about 11% and 31% [3]. The other stocks held the remaining 69% to 89% of the money, and as a group they returned between about minus 2.2% and minus 2.9% [4].
In my view, a cap-weighted fund was a bet on four companies this quarter in its return and not in its holdings. Cap weighting gives the largest companies the most influence [14]. By money the four were a minority [3], and by result they were more than the entire gain [2]. With 311 of roughly 500 members down, about 62% of the index fell, so the median constituent lost money in a quarter the index rose [5].
I think the weakness outside the four is mainly a rates problem. Treasury yields sat at multi-decade highs, and two of the drags the report names, utilities and real estate, are both rate-sensitive [10][9]. The counter-case is oil, which stayed elevated on tensions around Iran and weighed on companies that have to buy energy, according to the report [12]. The rates view is wrong if yields come off their highs and the count of decliners stays near 311 [5][10].
What to watch
- Microsoft's next Azure figures and Meta's next AI results, the quarter's named catalysts, will show whether the four can repeat a 300-point contribution.
- Published quarter-end index weights for the four, which would replace the 11% to 31% bound with an actual figure.
- Fourth-quarter breadth: whether the stocks outside the four add points after subtracting about 150 in the third quarter.