Good morning,
The market narrative that emerged in June has carried over into July: profit-taking in technology—particularly semiconductors—with much of those proceeds rotating into more defensive sectors of the market. The major indices this week reflect that pattern:
- S&P 500: -0.54%
- Nasdaq Composite: -1.52%
- Russell 2000: -0.10%
- EAFE (International Developed): +0.22%
- Emerging Markets: -1.54%
- Philadelphia Semiconductor Index (SOX): -8.5%
Semiconductors remain the lifeblood of the AI revolution. At their peak earlier this year, the Philadelphia Semiconductor Index (SOX) was up an extraordinary 107%. Even after the current correction, the index is still ahead 67% year-to-date through yesterday’s close—a reminder of just how powerful this year’s advance has been.
Futures are lower again this morning as AI faces another test. Overnight news introduced another potential headwind: more competition from increasingly capable and efficient Chinese AI models.
Ironically, today’s trading may reveal more than the news itself. If, despite another negative AI headline, technology declines less than it has on recent selling days, dip buyers may conclude that the worst of the correction is behind us. Markets often begin to stabilize when they stop reacting aggressively to bad news.
On Monday, we’ll discuss what the market needs to tell us over the coming weeks for investors to maintain a constructive, bullish outlook.
Have a wonderful weekend.
Be well,
Mike