Weekly Market Update: Tech Stumbles, but the Broader Market Holds Steady

Markets finished the week mixed as leadership continued to rotate beneath the surface.

The S&P 500 slipped -0.1%, while the Nasdaq declined -2.5% as investors moved away from Technology stocks. However, the weakness in the major indexes didn’t tell the full story.

Both value stocks and the equal-weighted S&P 500 outperformed, which suggests that the average stock held up better than the largest companies driving the headline indexes. Meanwhile, high-beta and momentum stocks led the market lower because of their heavy exposure to Technology, which declined -4.3% for the week.

Even so, eight of the eleven S&P 500 sectors finished higher, led by Energy and Consumer Staples. That broader participation helped offset some of the weakness in Technology.

Bonds were mostly unchanged. However, longer-dated Treasury bonds modestly underperformed as oil prices surged nearly +10% following renewed conflict in the Middle East.

Elsewhere, the VIX, a measure of expected market volatility, held steady. The U.S. dollar was little changed, while Bitcoin gained +1.0%.

Key Takeaways

Inflation Cooled Sharply in June as Energy Prices Fell

Consumer inflation declined sharply in June.

The Consumer Price Index, or CPI, fell -0.4% for the month, marking its largest monthly decline in more than six years. As a result, the annual inflation rate slowed to +3.5% from +4.2% in May.

Wholesale inflation eased as well, suggesting that some price pressures were moderating before reaching consumers.

However, much of the improvement came from energy. Gasoline prices declined nearly -10%, which pulled down both consumer prices and wholesale costs.

That distinction matters because June’s report reflects a period when oil prices were falling and were significantly lower than they are today. Since the beginning of July, the U.S.-Iran ceasefire has broken down, and crude oil has climbed back toward $80 per barrel after starting the month below $70.

Why it matters: June’s inflation improvement was real, but it depended heavily on lower energy prices that have already begun to reverse. With inflation still above the Federal Reserve’s 2% target and oil prices climbing again, the central bank has signaled that it may need to raise interest rates.

Wall Street Banks Reported Strong Second-Quarter Earnings

Wall Street banks benefited from a busy and volatile second quarter.

Banks earn fees when companies issue debt or stock, complete mergers, go public, or increase their trading activity. During the second quarter, all of those areas were active.

A wave of dealmaking and initial public offerings, including the roughly $75 billion SpaceX debut, helped drive investment banking revenue higher. At the same time, market volatility tied to the Middle East conflict and the continued AI boom supported trading revenue.

AI-related financing added another source of activity. Companies continued raising debt and equity to fund the construction of data centers and other infrastructure needed to support AI development.

As a result, Goldman Sachs reported the strongest quarter in its history. JPMorgan Chase, the nation’s largest bank, increased earnings by more than +40% compared with the same period a year ago.

Why it matters: The same active and volatile market environment that created uncertainty for investors worked in the banks’ favor. When companies raise capital and investors trade more frequently, banking fees and trading revenue tend to rise.

The Broader Market Held Steady as Technology Turned Volatile

Semiconductor stocks continued to experience sharp day-to-day swings as investors questioned the pace, cost, and potential payoff of the AI buildout.

However, that volatility hasn’t spread across the broader market.

Instead, market leadership has rotated. As investors reduced exposure to chipmakers and other Technology stocks, they moved into areas such as Financials, Industrials, Energy, and Consumer Staples.

Because of that rotation, the S&P 500 remains within 1% of its early June record despite the recent weakness in Technology.

There are also few signs of broader financial stress. The VIX remains in the mid-teens, while credit markets have stayed calm and credit spreads remain extremely tight.

Why it matters: This year’s most popular trade has become more volatile, but the weakness hasn’t pulled the entire market lower. Other sectors have begun to participate, helping offset the decline in semiconductor and Technology stocks.

Consumer Spending Continued to Rise in June

Retail sales increased +0.2% in June. That was slower than May’s revised +1.0% gain, but it was in line with expectations.

Once again, energy prices played an important role.

Lower gasoline prices reduced sales at gas stations, which weighed on the headline retail sales figure. However, those same lower energy costs also helped ease inflation and left consumers with more money to spend elsewhere.

Excluding gasoline, retail sales increased +0.7%. Online shopping contributed to the gain as consumers took advantage of promotions surrounding Amazon’s Prime Day.

Why it matters: Consumer spending drives most of the U.S. economy. June’s report suggests that spending is continuing to hold up rather than stall, particularly once the effect of lower gasoline prices is removed.