When looking at the market, we find many different catalysts for movement.  With so many issues out there, it’s hard to believe any one stock can have a great deal of influence.  However, I’ve found the Microsoft is one name that leads not only tech names but the general market up AND down. 

Cap-weighted indices such as the S&P 500 and the Nasdaq can be influenced by megacap names.  To be sure, the top eight names in the Nasdaq 100 are probably responsible for 60% of the movement.  Strikingly, the top 100 names in the S&P 500 probably influence the big index by about 40%.  As for the Dow Industrials, this is a price-weighted average which is influenced more by higher priced names, such as IBM, MMM, and UTX.  But looking at the other two indices you can find a strong correlation to their movement with Microsoft.  To a lesser extent I’ve also found Intel to have some influence.  Whether it’s seasonal strength or earnings, big cap names can influence market players.  Strong volume and price action in these issues are likely to get buyers in off the sidelines.  Also, see the influence Microsoft had on the markets after an earnings miss in April 2006…a nasty month of May if you were long that lasted well into July.       

So, why Microsoft?  It’s pretty obvious as it has the highest market cap on the Nasdaq, and is one of the top 5 on the S&P 500.  It’s clearly rising tide that can lift all boats.  Even though big money is likely not made in this name any longer, keep tabs on the bigger names that can drive market momentum.