US stock market advance masks treacherous currents under the surface

US stock market advance masks treacherous currents under the surface

US stock markets are once again sailing to record peaks, yet under the surface, a strong tide is pulling down the share prices of hundreds of companies to their lowest levels of the past 12 months.

The rising divergence in the performance of individual shares hints at a fierce rotation, supercharged by booming options trading and a hawkish pivot by the Federal Reserve that could upset many investors’ positions.

Investors say the moves are unusual given they are confronted with both a policy change from the Fed and the fast spreading Omicron coronavirus variant — two tectonic shifts of the types that often prompt stocks to move in tandem.

“We are possibly on the verge of the Fed taking away the punchbowl for the first time in three years,” said Jason Goldberg, a senior portfolio manager at volatility-focused hedge fund Capstone. “Think about how many strategies are predicated on the Fed having one’s back; you have to rethink those.”

Earlier this month 1,380 stocks traded on US stock exchanges hit their lowest levels in a year. Days later, when the S&P 500 clinched its first record closing high in three weeks and extended its year-to-date gain to 25 per cent, more than 210 stocks