Stock Fragility Hits Record Highs, Sparking Market Concern
Surging instability in major U.S. stocks is driving single-stock "fragility" to unprecedented levels. This heightened volatility mirrors patterns witnessed during the late 1990s dot-com bubble, raising concerns about the market's susceptibility to whipsaw movements among stock clusters.
According to Bank of America Corp. strategists, stock fragility among the largest 50 S&P 500 companies is on course to reach its highest point in over 30 years. This measure assesses a company's daily share-price fluctuation relative to its recent volatility. The findings reveal that fragility has surpassed levels seen during not only the internet boom but also the Russian default and Asian financial crisis of the 1990s.
Despite stock indexes hovering near record highs, the growing nervousness in individual stocks signals potential risks for the broader market. Matt Maley, chief market strategist at Miller Tabak + Co., notes that the market may appear range-bound but hides a substantial increase in volatility for individual stocks. This volatility, coupled with rising bond yields and tariff concerns, amplifies uncertainty and jitters.
Recently, China's DeepSeek AI model triggered a selloff in tech stocks, with 70 S&P 500 stocks experiencing fragility events of three standard deviations or greater. This clustering effect echoes the episodes observed during the dot-com bubble and illustrates how external catalysts can instigate significant stock movements.
The surge in stock fragility began in recent years with megacap stocks like Nvidia and Tesla experiencing large earnings-driven swings. This trend has persisted in 2025, spreading more broadly across sectors. IBM's earnings announcement resulted in a 14 standard-deviation move, the largest among the top 50 S&P 500 stocks this year.
The contagion effect of fragility is evident in the giant swings witnessed in pharmaceutical giant Merck and tobacco company Philip Morris International, demonstrating its spillover to other market segments. As the largest outliers, including tech giants, hold significant weight in stock indexes, their volatility ultimately affects the broader market.
Investors, particularly those seeking exposure to technology, should consider incorporating lower-volatility stocks into their portfolios. Bloomberg Intelligence data shows that Russell 1000 Index tech stocks with low trailing price swings have outperformed their high-volatility counterparts since early 2024. The low-volatility factor has gained 22%, compared to 13% for the high-volatility group.