(Bloomberg) -- On the surface, it was another up week for the S&P 500 Index. Underneath, things were a little more complicated.
Consider a version of the S&P 500 that strips out market-value biases -- the “equal-weight S&P,” in which Apple Inc. matters as much as relative pipsqueaks like Garmin Ltd. and Macy’s. Analysts normally like to see the two indexes moving together, a sign the rising market is lifting all boats.
That didn’t happen in the past five days. In fact, the equal-weighted version just posted its biggest weekly drop since May, and its worst week versus the regular S&P 500 all year. The reason: while enough megacap stocks rose to keep the S&P 500 afloat, single-stock blowups were far more common than single-stock rallies.
How much more? Thirteen stocks posted declines greater than 10 percent, compared with just three that rose that much. Most of the carnage was in the energy and drug industries, with companies from Chesapeake Energy Corp. and Range Resources to Mylan and AmerisourceBergen posting double-digit declines.
For the week, the S&P 500 climbed 0.2 percent to 2,476.83, the fourth increase in five, while its equal-weight cousin slipped 0.4 percent. The Dow Jones Industrial Average added 262.5 points to 22,092.81, closing above 22,000 for the first time. The Nasdaq Composite Index lost 0.4 percent to 6,351.564.
Up 8.4 percent in 2017, the equal-weight S&P 500 is now trailing the capitalization-weighted index by 2.3 percentage points year to date. Only once since the bull market began has the gap been wider by early August.
A similar bias shows up elsewhere. Large-cap stocks have risen six times as fast as smaller companies in the Russell 2000 Index through this week. The advance in mid-size companies is about half the S&P 500.
“Thinning breadth is tricky for bigger active investors,” said Stan Altshuller, chief research officer at data-analytics firm Novus Partners Inc. “When investors pile into the same securities that gain faster than everyone else in an environment of low market breadth, they are going to get spooked. Breadth may not be the markets’ biggest challenge right now, but between low volatility and low correlation, it all adds up.”
Widespread gains have been a hallmark of the eight-year rally in U.S. equities -- by this time of year, the equal-weight gauge is leading by an average 2.6 percentage points.
The equal-weight S&P moved largely in sync with the market-cap weighted index through April. The top five leaders in the benchmark index account for 27 percent of the gains since then, with double-digit rallies in Facebook Inc. and Microsoft Corp., a 73 percent climb in NVIDIA Corp. shares, and a 10 percent rally in Apple Inc.
Still, there are a handful of ways to measure market breadth. Nearly half of S&P 500 constituents are ahead of the index so far this year while 144 are down, demonstrating “substantial dispersion” in the market, according to Citigroup’s Tobias Levkovich.
From a technical standpoint, the ratio of S&P 500 companies touching 52-week highs versus those at 52-week lows was about 15 when the benchmark index last set a record. That’s roughly half the average number of highs during previous instances of record S&P 500 closes in the past two years. The metric now sits at 5.1.