Piper Sandler has highlighted a decline in US stock market participation, with several of its technical indicators signalling weaker intermediate-term trends despite gains in communications, software and cybersecurity shares.
In a Wednesday research note, the firm advised against aggressively increasing equity exposure until broader market participation improves.
The S&P 500 fell 0.48% on Tuesday, contrasting with a 0.04% gain in the equal-weighted index. The difference reflected varying performance among index constituents rather than a uniform decline across the market.
Communications shares advanced 2.2%, breaking above resistance at their 200-day moving average.
Within technology, semiconductor stocks declined while other industry groups advanced.
The SMH semiconductor fund lost 4.75% as AI safety warnings affected semiconductor and infrastructure stocks. Software shares rose 5%, cybersecurity stocks gained 6%, and CrowdStrike (NASDAQ:CRWD) reached a record high.
Piper Sandler’s broader technical indicators presented a different picture from the gains recorded in those sectors.
Its 26-Week New Highs and 40-Week Technique measures are currently in sell positions, while the firm’s MACE analysis indicates that the number of stocks in weekly downtrends exceeds those in uptrends.
The percentage of market groups maintaining defined uptrends fell by 10 percentage points last week, declining from 53% to 43%.
The firm also highlighted developments in government bond yields and energy markets.
The 10-year US Treasury yield briefly exceeded 5.0%, while crude oil approached $105 per barrel before settling around $101.50.
According to Piper Sandler, a sustained move in the Treasury yield towards 5.2% and 5.31% would put pressure on equity valuation multiples.
For crude oil, the firm identified $106 as an important technical level. A move above that threshold would establish $111 as its next target.
Meanwhile, the S&P 500 and Nasdaq continue to trade near support associated with their 50-day moving averages.
Piper Sandler’s assessment combines weakening market breadth, divergent sector performance and higher bond yields. The firm favours waiting for broader participation to recover before increasing equity exposure.
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