NEW YORK (Reuters) -Wall Street's reliance on a small number of high market-value stocks to keep momentum going for the U.S. equities bull market will be tested in coming days as major technology and growth companies report earnings.

Concentration in widely followed market barometers such as the S&P 500 and Nasdaq Composite means that weakness in just a few names can have broad ramifications as the indexes hover at record highs. 

"When a handful of stocks dominate the market ... if you do have a period of disappointment from those stocks, you could see disproportionate impacts on your portfolio from just a handful of company-specific issues," said Michael Reynolds, vice president of investment strategy at Glenmede.

Drawing attention to such top-heavy market leadership on Wednesday will be earnings results due from Google parent Alphabet and Tesla, the first of the "Magnificent Seven" megacaps to report this period.

That group - which also includes Nvidia, Microsoft, Apple, Amazon and Meta Platforms - earned the "Magnificent" moniker because of their dominant business positions and huge stock gains in 2023 and 2024. 

Stock performance this year among the Magnificent Seven has been mixed. But they have all rebounded since April from a selloff following President Donald Trump's "Liberation Day" announcement of sweeping global tariffs.

The group amounted to one-third of the weight of the S&P 500 as of Friday, due to their massive market caps, their largest combined presence since the start of the year, according to LSEG Datastream.

Alphabet shares are up about 1% on the year, while shares of Elon Musk-led Tesla are down about 18%. Together, they account for over 5% of the S&P 500's weight.

Other data points also indicate market concentration becoming more extreme.

The top 10 weights in the S&P 500 last week hit 37.3% of the index, near the 38% level it reached in January, which had been its highest level on record, according to S&P Dow Jones Indices, citing data since 1975.

These massive stocks generally have higher valuations. The top 10 stocks have an average price-to-earnings ratio of about 26 times, compared to 20 times for the rest of the S&P 500, said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

"The biggest stocks are very expensive," Shalett said. "If the biggest stocks fall the most, the index is very vulnerable."

The S&P 500 technology sector recently accounted for 33.9% of the entire S&P 500's market value, the largest share since March 2000 during the height of the dot-com bubble era, according to LSEG Datastream.

The S&P 500 is considered a benchmark for the stock market, but its top-heavy nature could mean investors who own funds that mirror the index are less diversified than they think.

"If you are designing a portfolio, you really need to consider, OK, what are the weights there?" said Todd Sohn, ETF and technical strategist at Strategas. "It's not as diversified as it has been in the past. Then you have to consider some other means out there to keep that portfolio balanced."    

Nvidia, which recently became the first company to top $4 trillion in market value, had as of Tuesday a 7.83% weight in the S&P 500. That is the most a single stock has ever accounted for in the index, topping the 7.7% that Apple reached last year, according to Sohn, who looked at 45 years of data.

The weight of Nvidia - a semiconductor company that has symbolized the artificial intelligence boom - is greater than five entire S&P 500 sectors out of 11 in the index, including consumer staples, which includes 38 stocks and has a 5.4% weight, and energy, a 23-company group with a total S&P 500 weighting of slightly less than 3%. 

Heading into the heavy part of earnings season, the S&P 500 is up over 7% this year, and becoming increasingly led by larger stocks. 

Since April 8, when the market hit its low point for the year following Trump's tariff announcement, the S&P 500 has gained nearly 27%. The equal-weight version of the index - which is considered a gauge of the average S&P 500 stock - has risen 21.5% in that time.

Since the end of 2022, the S&P 500 has gained over 60%, more than doubling the equal-weight version's gains in that time.

"When the market gets really expensive and narrow ... the market becomes more vulnerable," said Matthew Maley, chief market strategist at Miller Tabak. "So it's a big concern for me."