The booming stock market returns of the past decade have come with a nagging worry -- what if the tech stocks that dominate the S&P 500 index fell hard? This past week, investors got to watch that anxiety play out in real time. And lo and behold, it wasn't all that bad.
The Dow Jones Industrial Average is actually up 1% for the week and the S&P 500 is down 1.8%, even as the Roundhill Magnificent Seven exchange-traded fund has dropped 6% -- its worst showing in over a year -- and the Nasdaq Composite is off 4%.
The tech giants have broken off from the rest of the market because the artificial-intelligence buildout is getting worrisomely expensive. So many microchips are being diverted to AI data centers that there aren't enough left for consumer devices, and it's starting to affect the price of tech products. On Thursday, Apple hiked prices on computers and iPads by hundreds of dollars as the company says it can no longer absorb the price increases. Its stock fell 6%, the most in more than a year. Shares of other tech giants have also been reeling.
What's interesting is that the rest of the market is doing just fine. At least for now.
One way to see this play out is to watch the S&P 500 equal-weighted index, which gives each stock the same weight, removing tech's heavy influence. The index was up 1.7% this week, outperforming the S&P 500 cap-weighted index by 3.5 percentage points -- the largest gap since 2020 and the second-largest in 20 years, according to Dow Jones Market Data.
The market's breadth -- the number of advancing stocks versus declining ones -- has still been positive, even on days when tech is a mess.
"This suggests investors are rotating their money into sectors beyond tech, a potentially healthy development," writes Joe Mazzola, head trading and derivatives strategist at Charles Schwab. Mazzola notes that "old-fashioned U.S. industrials" like Deere and Caterpillar have had good weeks, along with transportation names that investors track for signs of the economy's health.
The tech selloff shouldn't alarm investors who play the broader market, Mary Ann Bartels, chief investment strategist at Sanctuary Wealth, tells Barron's. "We're not in a broad-based selloff when you have banks breaking out and you have biotech breaking out," she says. "To us, it's a rotational correction that's long overdue."
Bartels thinks that tech stocks could struggle more in the days ahead, with chip stocks seeing particular weakness -- potentially dropping another 20% or 30%. But that shouldn't scare investors away from the market. "They should remain fearless," she says.
Even Apple's price increases aren't necessarily a bad sign -- if consumers pay up. "I think Apple's going to be a very important barometer, to see if raising your prices can actually stick," Bartels says. "If they do, it means you're still in this inflation-boost phase, which is actually good for corporate profits."
IPads aren't bargains anymore. Stocks still could be.
Write to Avi Salzman at avi.salzman@barrons.com
To subscribe to Barron's, visit http://www.barrons.com/subscribe
(END) Dow Jones Newswires
June 26, 2026 21:30 ET (01:30 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments