Story stocks not only names fueling bull run

NEW YORK — The Great Stock Market Rally of 2013 has been as inclusive, as democratic and as strong a rally as Wall Street has seen in a very long time.

In fact, despite a slew of references to the glory days of the late '90s and talk of a stock market bubble, this year's stock surge is nothing like 1999, a go-go period on Wall Street when the market was ruled by an oligarchy of large tech stocks like Microsoft, Cisco Systems and Oracle.

Indeed, this year's rally isn't a Nifty-Fifty-type advance, where a few "brand name" stocks do most of the heavy lifting and power the performance. Nope, this year's rally has been driven by nearly every single stock that trades in the benchmark Standard & Poor's 500-stock index.

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Not only does the S&P 500's 26.6% year-to-date put it on track for its best year since 1998, it's also far better than the 19.5% return in 1999.

But more important, the breadth of the rally, or the number of stocks powering the index higher, has been far superior than in 1999 and 2007, the years of the past two stock market tops.

Indeed, unlike the tail-end of the biggest bull market in history back in 1999, when two-thirds of the S&P 500's gains came from just 10 high-profile stocks, the rally this year has come from a much wider net of stocks, says Strategas Research Partners. In fact, the top 10 contributors in 2013 account for less than one-fifth, or 18%, of the S&P 500's total gain.

And a broad market advance is considered healthier and a lot more sustainable than a so-called narrow advance in which a handful of story stocks drive the performance.

"The punch line is that narrow markets are more consistent with market tops," says Chris Verrone, analyst at Strategas. "Not much evidence of that right here."

Back in 1999, 10 stocks accounted for! 65% of the S&P 500's nearly 20% gain. The market topped in March 2000.

Similarly, in 2007 the 10 biggest contributors actually accounted for 116% of the index's 3.5% gain, which means the broad market gauge would have been negative had it not been for big contributions from top-performing stocks like Apple, ExxonMobil and Google. The market peaked in October of that year.

In general, when fewer stocks are working, it is a sign that most of the other stocks in the broad market index have already topped out.

"At tops you'll see less stocks advancing," says Todd Sohn, analyst at Strategas, who co-authored the report with Verrone. "Stronger 'breadth' numbers equal a stronger market."

And market breadth has been as strong this year as it has been since 2013. As of Nov. 27, 449 stocks in the S&P 500 were up this year, the best since 458 finished in the black in 2003, according to S&P Dow Jones Indices.

"Broader gains across economic sectors speaks to the depth of the recovery," says Howard Silverblatt, senior index analyst at S&P. "Unlike the market dependency on information technology in the late '90s, there is no single dominant group."

Follow Adam Shell on Twitter: @adamshell.