Wall Street is experiencing a week of calm and consolidation as it awaits this afternoon’s U.S. inflation data. This phase follows the new records reached by the S&P 500 last week, while the Nasdaq has lagged behind the broader market index. This gap between the two baskets is the result of movements beneath the market’s surface, which we will now analyze in detail.

S&P 500 Near Highs, Nasdaq Still Behind

In yesterday’s session, the two indexes closed almost in line, with the Nasdaq 100 down 0.33% and the S&P 500 down 0.32%. On a monthly basis, the Nasdaq is the best performer, up 4.29%, contributing to its 16.92% gain since the start of the year. The S&P 500, meanwhile, is up 2.82% in August and 12.47% since the beginning of the year. Although it does not appear on the chart, the Dow Jones is also up 11.40% since the start of 2026.

S&P 500 and the Breadth Indicator

In the lower section of the S&P 500 daily chart, we have our own breadth indicator, the Matrix Breadth Switch.

This tool measures how many stocks in the basket are actually participating in the index’s movement. Green bars indicate that the majority of components are providing upward momentum, while red bars indicate the opposite. For the S&P 500, the reading is +103.00, meaning that the advance is broad and well distributed.

The Nasdaq Remains Behind

Looking at the Nasdaq chart, a divergence immediately stands out: unlike the S&P 500 and Dow Jones, the index has not reached new all-time highs. More importantly, the Matrix Breadth Switch is negative at -83.90, with the histogram dominated by red for several months now. As a result, only a few stocks are supporting the index, while most remain in negative territory.

The Premium Paid for the Technology Sector

The price-to-earnings (P/E) ratio measures how much the market pays for each dollar of corporate earnings. For the S&P 500, the forward figure, based on expected earnings over the next twelve months, is 20 times, according to FactSet. The figure based on earnings already realized is instead as high as 28.2 times, above long-term averages. For the Nasdaq 100, estimates from Siblis Research at the beginning of July indicate higher values: approximately 25 times expected earnings and 35 times realized earnings. The technology sector therefore costs approximately one-quarter more than the S&P 500. The table below shows where this premium comes from—namely, the expected earnings growth on the two fronts.

Expected Earnings Are Driving Prices

The recent rise in the S&P 500 is based more on earnings expectations than on multiple expansion. Since the end of June, the index price has risen 2.8%, while the twelve-month estimate for EPS, or earnings per share, has increased by 4.7%. For this reason, the forward ratio has actually fallen from 20.4 to 20 times. Analysts estimate EPS growth of 27.4% in the current third quarter (Q3). For the full year 2026, the earnings growth forecast rises to +30.0%. The ratio nevertheless remains above its historical average over the past five and ten years.

Earnings Concentration Is the Real Risk

The strength of U.S. earnings, however, conceals a very high concentration in just a few companies. Excluding Alphabet and Amazon, second-quarter earnings growth falls from +50.4% to +32.0%. Those two names recorded accounting, rather than operating, gains related to revaluations of equity holdings. The real weakness therefore concerns the Nasdaq 100, where only a few stocks are genuinely supporting the index. In the S&P 500, by contrast, participation in the advance remains broad and distributed across many names.