2026-10-04

Equal-Weight S&P 500 Just Hit a Third-Ever 7-Week Losing Streak - While the Nasdaq 100 Set a Record and 10-Year Yields Topped 2002 Highs

Written & reviewed by the TradeSmrt editorial team · 2026-10-04

In this article

What Happened
Why the Index and the "Average Stock" Are Moving in Opposite Directions
What to Take Away From This
FAQ
Sources

What Happened

Over the trading week spanning Thursday, October 1 and Friday, October 2, Wall Street produced two seemingly contradictory "record-setting" headlines at the same time. The first: the equal-weight version of the S&P 500 (tracked by the Invesco RSP ETF, which assigns all 500 constituents the same weighting) closed its seventh consecutive losing week, slipping to $208.02 - roughly 7% below its 52-week high of $223.44. That marks only the third time in the index's history that it has fallen for seven straight weeks. The first two instances came during the 2002 dot-com bust and the 2022 bear market, both periods when the broader market was under serious, widespread stress.

Yet during that same stretch, the traditional, market-cap-weighted S&P 500 sat just 2.1% below the all-time high it set back in August. Go a step further and the divergence gets even starker: the Nasdaq 100 climbed 1.00% on Friday, October 2, to close at a fresh record of 30,807.93. Nvidia hit a new intraday all-time high of $237.88 that same day, pushing its market capitalization past $5.7 trillion and extending a rally that has lifted the stock roughly 27% so far this year. Memory-chip maker Micron Technology added fuel to the fire, posting adjusted earnings per share of $33.42 against a $31.61 estimate - another data point suggesting the AI infrastructure buildout is still running hot.

Put the two headlines side by side and the picture becomes clear: by the "index" measure, the market is sitting near all-time highs, but by the "average stock" measure, it's mired in a losing streak on par with 2002 and 2022. Nine of the S&P 500's eleven sectors declined that week; only Energy, Technology, and Utilities finished higher. Financials alone shed roughly 7% in September, and the KBW Bank Index - a benchmark for the sector - has now fallen more than 10% from its mid-August peak, putting it in correction territory. Small caps weren't spared either: the S&P SmallCap 600 fell 0.71% over the same week. It's a rare and unusually wide gap between the market's headline and its internals.

Behind that gap sits a sharp run-up in long-term interest rates. The 10-year Treasury yield touched 5.34% intraday on Thursday, its highest level since 2002, while the 30-year yield climbed as high as 5.69%, also a multi-decade high. Yields eased somewhat on Friday - the 10-year pulled back to around 5.18% - after September's jobs report showed nonfarm payrolls rising by just 29,000, far below the roughly 90,000 economists expected, with the unemployment rate ticking up to 4.2%. The weak print fed hopes that the Fed will hold off on further tightening. (The jobs report itself and its market reaction are covered in a separate article; this piece focuses on why the index and the "average stock" moved in opposite directions under the same rate and labor backdrop.)

Why the Index and the "Average Stock" Are Moving in Opposite Directions

The key to understanding this split is how concentrated today's S&P 500 has become. In a cap-weighted index, a company's influence on the overall number scales with its market value. As Nvidia, Microsoft, Apple, Amazon, Meta, and Broadcom - the so-called "AI megacaps" - have ballooned in size, their combined weight in the index has grown right along with them. That means when this small handful of stocks rises, the headline index can print a fresh record even while the other roughly 490 names barely move the needle. The equal-weight index flips that logic: each of the 500 constituents gets about a 0.2% weighting regardless of size, so when it falls, it's telling you that the typical, median American public company's stock is actually losing value. The wider that gap grows, the less a single headline index number can tell you about the health of the market as a whole.

Rising long-term yields have acted as an accelerant for that split, though not in the way textbook logic would suggest. Higher rates are normally thought to hurt growth stocks more, since a higher discount rate reduces the present value of future earnings. This time, the opposite dynamic has dominated. AI megacaps are already generating enormous current cash flow, and investors' growth expectations for them are high enough to swamp the effect of a higher discount rate. In fact, ING estimates that roughly a fifth of the recent rise in long-dated yields is itself attributable to AI-driven growth expectations. Record levels of bond issuance by hyperscalers racing to fund data-center buildouts have added further supply pressure to the bond market, creating something of a feedback loop: AI optimism pushes yields higher, and the yield move itself partly reflects that same optimism.

Financials, small caps, and real estate, meanwhile, have absorbed the more conventional downside of higher rates. Banks have faced growing concern over unrealized losses on their bond holdings and rising deposit costs as long rates spiked, while small-cap companies - which tend to carry more floating-rate or short-term debt - have seen financing costs climb directly. One notable exception is Utilities. The sector is traditionally treated as a bond proxy that tends to underperform when rates rise, given its reliance on dividend yield for appeal. Yet Utilities was one of only three sectors to gain that week, as surging electricity demand tied to AI data centers overwhelmed the usual rate-sensitivity playbook. The upshot is that the line separating winners from losers this cycle runs less along traditional interest-rate sensitivity and more along a simple test: is this stock plugged into the AI buildout, or isn't it?

That concentration also shapes what to watch next. Starting mid-October, megacaps including Microsoft, Alphabet, Meta, Amazon, and Apple are due to report third-quarter results in quick succession. With so much of the index's gains riding on so few names, a disappointing capex outlook or earnings guidance from even one or two of them could hit the headline index far harder than it would have a few years ago, when index concentration was lower. Conversely, if the hundreds of lagging stocks have already absorbed most of their correction, a further cooling in yields could spark a long-overdue rotation into previously neglected names, broadening participation again. Which scenario plays out depends heavily on how those megacap earnings and the next round of inflation and labor data land in the coming weeks.

What to Take Away From This

A record headline index doesn't mean the broader market is healthy. Watch breadth indicators - like the equal-weight index or the advance-decline line - alongside the S&P 500 or Nasdaq headline numbers to see what's really happening beneath the surface.
The same rate move can hit different sectors in opposite ways. Utilities broke the textbook pattern this cycle because an AI-driven power-demand story outweighed its usual rate sensitivity. Don't apply rate-sector relationships mechanically; check what sector-specific catalyst might be overriding the usual playbook.
Rare historical patterns deserve a direct comparison to past cycles. A seven-week losing streak in the equal-weight index has only happened during the 2002 and 2022 downturns - worth noting as a caution - but also worth asking whether today's concentration, driven by a handful of highly profitable megacaps, is structurally different from those earlier episodes.
Check how concentrated your own portfolio really is. Even a broad index ETF can be quietly dominated by a handful of mega-cap names if it's cap-weighted. Pairing it with equal-weight or sector-diversified exposure can reduce concentration risk you might not otherwise notice.

FAQ

What's the difference between the equal-weight S&P 500 and the regular S&P 500?

The regular, cap-weighted S&P 500 gives bigger companies more influence over the index's movement. The equal-weight version assigns roughly the same 0.2% weighting to all 500 constituents, regardless of size, which makes it a better gauge of how the "typical" publicly traded U.S. company is actually performing.

If the index is near all-time highs, why are people calling this a warning sign?

Because that strength is concentrated in a small number of mega-cap tech stocks, while most other stocks are actually declining. When gains are this narrow, a stumble by just one or two dominant names can hit the overall index much harder than it would in a more broadly participating market - which is why analysts describe this as a breadth, or concentration, risk.

Why did tech stocks rise even as the 10-year yield hit a 24-year high?

Normally, higher rates reduce the present value of future earnings and weigh on growth stocks. This time, expectations for AI-related earnings growth were strong enough to outweigh that effect. Adding to the irony, a meaningful share of the yield increase itself is attributed to AI-driven growth optimism, meaning rates and AI stock prices have been rising for overlapping reasons.

Sources

This article is an original synthesis and analysis based on the reporting below, not a reproduction of the original articles. Please check the original sources directly for the most current figures.

⚠️ This article is for informational purposes only and is not investment advice. Markets change constantly, so always verify the latest data before making investment decisions.