Rotation Nation

Key Takeaways Last Week

U.S. stocks were mixed as AI and semiconductor weakness weighed on the S&P 500 and Nasdaq, while the Dow and Russell 2000 held up better. The S&P 500 fell -2.0%, Nasdaq fell -4.6%, Dow gained +0.6%, and Russell 2000 gained +1.0%. YTD, the S&P500 is up 7.4%, Dow 7.9%, Nasdaq 8.8%, and Russell 2000 +21.3%.

• AI and semiconductor stocks sold off as investors questioned AI profitability, valuation, and spending.
• The Dow and small caps outperformed, showing rotation away from mega-cap leadership.
• Oil fell sharply as supply fears eased; WTI moved back below $70/bbl and Brent near $73/bbl.
• May PCE inflation slowed but rose +4.1% year over year.
• Consumer sentiment improved modestly as gasoline prices eased.

U.S. Stock Performance – Index and Sector Moves

Financial markets were mixed during the week ending 6/26/26. The S&P 500 closed at 7,354, the Dow at 51,876, the Nasdaq at 25,297, and the Russell 2000 at 3,010.

Sector performance shifted away from semiconductors and hardware toward health care, utilities, consumer staples, software, and selected value/cyclical areas. The PHLX Semiconductor “SOX” Index fell about -7.3% for the week, its worst week since April 2025.

Source: Seeking Alpha

Sector performance went back toward momentum, technology, industrials, and select consumer discretionary.

Source: Seeking Alpha

S&P 500 Weekly Leaders and Laggards Ranked

Top Performers (WTD):

• Moderna (MRNA) – Rose after pipeline updates, including an in vivo CAR-T autoimmune program.
• Johnson & Johnson (JNJ) – Health-care rotation and defensive demand as tech sold off.
• Regeneron (REGN) – Gained with healthcare and biotech strength.
• ServiceNow (NOW) – Tech software rotation as investors moved away from chips.
• Workday (WDAY) – Software outperformed chipmakers

Bottom Performers (WTD):

• ON Semiconductor (ON) – Fell after announcing a $7B all-stock acquisition of Synaptics.
• Nvidia (NVDA) – Dropped about -7.5% for the week as money rotated away from AI chips.
• Sandisk (SNDK) – Fell with other memory/storage shares; -8.6% Friday decline.
• Micron (MU) – Sold off despite strong AI-driven results.
• NXP Semiconductors (NXPI) – Declined with the broader chip selloff and semiconductor rotation.

Breadth & Participation

Breadth improved despite weakness in the cap-weighted indexes. Equal-weight S&P 500 outperformed as mega-cap AI stocks lagged, while the Russell 2000 gained for the week.

Source: Seeking Alpha

International/Global

Global markets were mixed as AI weakness spread overseas. South Korea and Japan declined with global technology shares, while easing oil prices reduced inflation pressure.

Source: Seeking Alpha

Volatility & Risk Sentiment

Risk sentiment weakened in AI and semiconductors but improved in defensive, value, and small-cap areas.

VIX: 18.34

MOVE: 66.8

Bonds, Credit & Interest Rates

Treasury yields fell as oil declined and inflation data largely matched expectations. The 2-year Treasury ended near 4.07%, the 10-year near 4.38%, and the 30-year near 4.87%.

Economic Data, Monetary Policy & Earnings

May PCE inflation rose +4.1% year over year, up from +3.8% in April. Consumer spending rose +0.7% in May, versus +0.4% in April. Monetary commentary remained focused on whether the Fed may need additional hikes if inflation stays above target, even as oil relief reduced near-term inflation pressure.

Commodities, Currencies & Macro Assets

WTI crude: ~$69.68/bbl
Brent crude: ~$73.07/bbl
Gold: $4,100
Dollar Index: 100.6
Bitcoin: ~$60,027

Source: Seeking Alpha Flows & Positioning

Positioning rotated away from AI chips and mega-cap growth toward software, health care, small caps, consumer staples, utilities, and selected value areas.

What Matters This Week

• Fed speakers and July rate-hike expectations
• Oil prices after the Hormuz risk premium collapsed
• Does the normal seasonal strong summer rally begin into July 3-5 weekend.
•  Breadth: equal-weight vs. cap-weight leadership

Bottom Line

Markets ended the week with an AI reset. The S&P 500 and Nasdaq fell as semiconductor and AI hardware stocks sold off, but the Dow, small caps, health care, software, and defensive sectors showed better participation. The market remains sensitive to inflation, Fed policy, and whether AI earnings can justify elevated expectations.

Stock Talk

2H2026 Market Outlook YouTube Livestream Recap – Some Years its Harder Riding the Bull

Top Moves

• U.S. equities split sharply by leadership. The S&P 500 fell about 2.0% and the Nasdaq dropped 4.6%, while the Dow gained 0.6% and the Russell 2000 rose about 1.0%. The main story was weakness in mega-cap tech and AI-linked names, not broad market collapse.
• Rotation beat concentration. Equal-weighted and value-oriented exposure outperformed cap-weighted growth. Defensive sectors and rate-sensitive areas did better, while information technology and communication services were among the weakest areas
• Rates eased as oil fell. Yields moved lower as crude retreated toward pre-Iran-war levels, easing some energy-inflation pressure. That helped bonds and interest-rate-sensitive sectors.
• Oil dropped, but the geopolitical risk is not gone. Improving Hormuz-flow/de-escalation expectations.

Key Themes

• AI leadership is being stress-tested. Micron’s strong AI-memory results supported the “AI infrastructure still has demand” argument, but the broader tape punished crowded AI/mega-cap exposure.
• Inflation did not give the Fed an all-clear. May PCE rose 0.4% month over month and 4.1% year over year; core PCE rose 0.3% month over month and 3.4% year over year. Personal income and spending both rose 0.7%, which points to consumer resilience but also limits the case for easier policy.
• Better breadth is the silver lining. The week looked ugly at the index level because of tech concentration, but small caps, the Dow, defensives, and equal-weighted held up better.
• Geopolitics is feeding into the rates/inflation narrative. Lower oil helped yields and sentiment.
• Bottom line: this was a rotation week. The market is still up year to date.

Past performance is no guarantee of future results. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. The preceding discussion is for informational purposes only. Investing involves risk and no reference to any security listed above should be considered a buy or sell recommendation. Advisory services are provided through Oak Harvest Investment Services, LLC, a registered investment adviser.