The Nasdaq-100 gained 3.3% in September even as most of the U.S. stock market moved in the opposite direction.
The Russell 2000 fell 5.3%, the Dow dropped 4.1%, nine of 11 large-cap sectors finished lower, and 78% of S&P 500 stocks declined during the month. Yet large-cap technology and communications stocks were strong enough to keep the Nasdaq-100 moving higher, according to Nasdaq’s September review.
The divergence highlights an increasingly important feature of the U.S. market: the indexes investors watch every day are being driven by a much smaller group of companies than the broader market.
AI and Mega-Caps Are Carrying the Nasdaq
Technology gained 4.5% in September, while communication services rose 4.3%. Those were the only two large-cap sectors to finish meaningfully higher.
Because the Nasdaq-100 is heavily exposed to the largest technology and growth companies, strength in AI-linked names can outweigh weakness elsewhere.
That same concentration is visible in the S&P 500, where a relatively small group of mega-cap companies now accounts for a large share of overall index performance.
5% Treasury Yields Hurt Smaller Companies More
The other side of the divergence is the bond market.
The 10-year Treasury yield jumped 54 basis points during September to 5.29%, its largest monthly increase in four years. Nasdaq cited persistent inflation, higher energy prices, tighter monetary policy and heavy government and corporate debt issuance as factors behind the move.
Higher rates tend to hit smaller companies harder because they generally rely more heavily on external financing and often borrow at less favorable terms.
That helps explain why the Russell 2000 suffered its worst month since March 2025 while large-cap growth held up.
