Wall Street’s average stock holds up as chip names lose steam
Semiconductor shares slid again, but broader gains in energy, retail, banks and transport stocks helped keep the S&P 500 close to its high.
By Sal Moretti · Money Reporter
3 min read
The hottest chip trade on Wall Street cooled again this week, yet the broader market refused to crack.
Semiconductor stocks extended their pullback from the powerful run they logged in the second quarter, MarketWatch reported. The damage was concentrated enough that the average stock in the S&P 500 fared better than the headline index, a move strategists described as a rotation rather than a warning flare.
Oil and gas companies, retailers, banks and transportation shares helped offset weakness in semiconductors, according to the report. The so-called Magnificent Seven tech stocks had rebounded in recent weeks after a rough second quarter, though they also fell with the wider tech sector this week.
IBM added to the pressure after an earnings warning, MarketWatch reported. Dow Jones Market Data showed IBM shares recorded their worst week in data going back to 1972.
Equal-weighted stocks get their turn
The S&P 500 ended Friday with its second weekly loss in four weeks. Even so, MarketWatch reported that the index remained only 2% below its June 2 record closing high after largely moving sideways over the past six weeks.
The equal-weighted S&P 500, often used by strategists as a gauge of how the average index member is doing, beat the regular capitalization-weighted S&P 500 by more than one percentage point for the week.
Its relative showing against chip stocks was even sharper. Dow Jones Market Data showed the Invesco S&P 500 Equal Weight ETF posted its largest weekly outperformance versus the iShares Semiconductor ETF since May 2009.
Adam Phillips, head of investments at EP Wealth, told MarketWatch that the average stock is outperforming, while current data point to rotation. He said semiconductor leaders had hit an “air pocket,” and investors were seeking areas that appeared safer.
Chip stocks began weakening in late June, according to MarketWatch. The pressure persisted even after earnings reports from Samsung, Taiwan Semiconductor and Micron that the report described as apparently strong.
Stephanie Link, chief investment strategist and equity portfolio manager at Hightower Advisors, told MarketWatch that when a company posts good results and its share price does not rise, it suggests the trade is crowded.
Index moves stay relatively contained
Despite the churn under the surface, broad market swings have been muted. FactSet data cited by MarketWatch showed the S&P 500’s 1% drop on Friday was its first move of at least that size in either direction since June 26.
Markets also had to absorb renewed tension between the U.S. and Iran. MarketWatch reported that news of another round of U.S. military strikes appeared to weigh on stocks late Friday.
Gina Martin Adams, chief market strategist at HB Wealth, told MarketWatch it was remarkable that stocks had not fallen further given the Middle East developments and chip-sector losses. She said market breadth remained intact as other sectors picked up the slack from technology.
Dow Jones Market Data showed that 69% of S&P 500 stocks traded above their 200-day moving average on Thursday, the first time that share had topped that level since late 2024. By Friday’s close, 66% of index members were still above that long-term trend line.
The Nasdaq Composite fell 2.9% for the week, its steepest drop since late June, according to FactSet. The Dow Jones Industrial Average lost 490.59 points, or 0.9%, its largest weekly decline since March.
This story draws on original reporting from MarketWatch.