Wall Street Has a Mixed Week, Tech Takes Hard Hits

Markets were mixed last week, with big technology stocks getting hit hard while the rest of the market held its ground. The tech-heavy Nasdaq dropped 4.6%, its worst week in over a year, as investors grew nervous about the enormous spending on artificial intelligence and whether it will pay off. News that OpenAI may delay its IPO until 2027 added to the concern.

Underneath that, the picture looked very different. The Dow finished higher, small-company stocks set new highs for the year, oil fell back to pre-war levels, and bond yields eased. May inflation, measured by the Federal Reserve’s preferred gauge of Core PCE, hit 3.4%. That is the highest in over two years, but with oil currently well off its highs, this may be as bad as the inflation story gets for now.

Data sources: Yahoo Finance, CNBC, Reuters, Investing.com, as of June 26, 2026 close. Past performance is not indicative of future results.

A tale of two markets. Big tech stocks suffered their worst week in over a year, while small caps, value stocks, and the Dow held their ground or moved higher. Investors were seemingly trimming what had run too far and rotating into areas that had been left behind. Three developments drove the action:

The interesting part of last week was what happened underneath the headlines. While the Nasdaq was getting hit hard, the Russell 2000, which tracks smaller U.S. companies, gained another 1% and pushed its year-to-date gain to more than 21%. The Dow finished the week higher. Six of eleven sectors actually rose Thursday, with industrials, healthcare, and materials leading the way. That kind of rotation, money moving out of the most expensive corner of the market and into the rest of it, is generally a healthy sign. It suggests the broader market is on firmer ground than a Nasdaq-only view might lead you to believe.

A holiday-shortened week with markets closed Friday for the Fourth of July. Thursday brings the June jobs report, the headline event of the week and arguably of the month. ISM Manufacturing on Wednesday provides a key read on the factory side of the economy.

Thursday’s jobs report is the main event. Markets will be watching closely after May’s strong number of 172,000 jobs added. The new Federal Reserve Chair has been clear that the strength of the labor market is a key reason the committee is not in any hurry to cut rates. A cooler number this month would likely not change the rate picture immediately, but it may take some pressure off. A stronger-than-expected number could revive talk of a rate hike before year-end.

The Iran story has largely faded from the front pages as oil has dropped and tanker traffic has currently normalized, but it remains a variable worth watching. So does the tech selloff. Tech-focused funds saw record outflows last week, and any further weakness in mega-cap names could weigh on broader indexes, even if the rest of the market continues to hold up. With markets closed Friday, the week is essentially three and a half trading days, and volume should be light heading into the holiday.

Nobody can be right 100% of the time, as Templeton reminds us at the top of this letter, and last week was a textbook example of why that matters. If you owned only the largest technology stocks, it was a rough five days. If you owned a balanced mix of stocks across sectors and sizes, the week went relatively unnoticed in your account. The market did exactly what a healthy market is supposed to do when a single corner gets too expensive. It rotated. Money moved from where prices had run hot to where prices had not. That kind of behavior, while uncomfortable for tech investors, is a sign of underlying strength, not weakness.

Here is something worth pausing on. The so-called Magnificent 7, Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla, are collectively down nearly 5% for the year. These seven stocks make up roughly a third of the entire S&P 500. And yet the S&P 500 is up more than 7% on the year. Think about that for a moment. The rest of the market, the other 493 companies, has carried this rally on its back while the biggest names have been a drag. That kind of broad participation only happens when the underlying fundamentals are doing the work. Inflation looks to have peaked for now. Oil is back to pre-war levels, which should work through the economy over the coming months. The labor market is steady, with consumer spending up 0.7% in May and initial jobless claims falling to 215,000 last week. Corporate earnings remain relatively exceptional. These foundations have carried the market through every challenge this year, and they set up an interesting possibility for the second half. If the Mag 7 finds its footing again, even partially, the market could see a real rally on top of what is already in place.

No setup is without risk. The AI selloff could deepen, the jobs report Thursday could surprise either way, and inflation may prove stickier than the falling oil price suggests. We are watching all of it closely. But the broader story heading into the second half remains a constructive one. The S&P 500 is up more than 7% on the year, the Dow is up nearly 8%, and small-company stocks are up more than 21%, all while the biggest names in the market have been a headwind rather than a tailwind. That is a market doing real work, even with all the headline turbulence.

If you have any questions about your portfolio or what any of this means for your specific situation, please don’t hesitate to reach out to your CIAS Investment Adviser Representative. We are here to help you navigate these markets with confidence.

Important Disclosures:

Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The statements contained herein are solely based upon the opinions of Edward J. Sabo and the data available at the time of publication of this report, and there is no assurance that any predicted or implied results will actually occur. Information was obtained from third-party sources, which are believed to be reliable, but are not guaranteed as to their accuracy or completeness.

The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Capital Investment Advisory Services, LLC (CIAS) reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.