Published June 26, 2026
Just a brief note this week as the stock market continues a slow summer grind. While the action at the broad index level has been flat overall (the S&P 500 and Nasdaq both sit roughly where they were seven weeks ago), the action underneath has been furious. There has been a serious rotation OUT of the Mag 7 stocks that have powered this market for so long. Here’s the chart of the group:
Software had a very brief resurgence. It didn’t stick:
Amazon trades where it was almost a year ago.
Meanwhile, the baton has been passed to the AI/datacenter buildout:
And industrial stocks broadly:
Related or not, Chinese stocks have fallen apart:
The drop in the Mag 7 stocks has nominally made the market cheaper as those companies sported high P/E ratios (though now they carry sub-30 P/Es). The market has become more volatile as it shifts with tech stocks up +2% one day and down that much the next. The static broad market indexes obscure the fact that the market has clearly changed.
Market Update
A split market kicked off the week. Industrial and semiconductors rose while large-cap tech stocks led the Nasdaq to a -1% dip. A sharp -10% selloff in the world’s hottest stock market, South Korea, took down tech stocks Tuesday leaving the Nasdaq down -2%. Another modest -0.4% dip for the Nasdaq Wednesday ahead of earnings from memory chip leader Micron. Investors have once again become cautious on the AI trade as companies continue raising massive amounts of money to fund exorbitant spending. Google and memory maker SK Hynix are the latest companies to float huge share and/or debt offerings. After hours Wednesday memory chip maker Micron posted massive earnings with sales rising 4x over the prior year on AI-related demand. The news sent futures on the Nasdaq up +2%. But the morning gain evaporated Thursday with the Nasdaq closing down -0.4% as Apple announced big price increases on iPad and iMac products due to surging memory costs. The high and rising cost of AI rollouts is now leading to real actions, a cause of concern for investors. As a result, markets showed little appetite for buying this week’s dip. To wit, in Friday’s trade, stocks traded largely sideways despite the selloff earlier in the week.
Stocks returned to a negative tone this week with investor concerns about AI spending once again moving to the forefront. Despite interest rates dropping back, the S&P 500 gave up -1.79% this week. The Nasdaq 100 (QQQ) returned two weeks’ worth of gains with a -4.12% slump. Small cap stocks did benefit from the fall in rates though (and relative lack of tech companies) to post a slim +0.95% gain.
Warm wishes and until next week.