Josh Schafer
A tech selloff is leading the markets lower as AI jitters hit the largest stocks on Wall Street. Not even a blowout quarter and 15% stock pop from Micron could save the sour mood last week. But there are still some bright spots to be found. Today I'm breaking down why housing stocks have been on a tear over the past month, and why the Magnificent Seven are falling from grace.
-- Josh Schafer, Barron's Investor Circle
Surprise, surprise? Stocks are graded on a curve. In the same way a dismal class performance on a business school exam will still yield some A's, curves also apply in the stock market when a company's results aren't necessarily jumping off the page. And that's where some of the most interesting opportunities are in the market right now -- especially housing.
Consumer stocks and housing-related companies were hit hard by the oil price spike this year. On May 19, WTI crude oil hit its most recent peak of more than $109 per barrel, while the 10-year Treasury yield hit its most recent high just below 4.69%. But the price of oil has dropped roughly $40 per barrel since then, and the 10-year Treasury yield is down by more than 30 basis points. In short, a huge weight on consumer and housing stocks is being lifted in real time, making them appealing to investors once more.
The selloff in those stocks during instances like an oil spike is often overdone because "people start to extrapolate that rates are going to continue moving up," Piper Sandler chief investment strategist Michael Kantrowitz tells Barron's. But when the situation proves to be more short term than investors originally thought, the bounce for those sectors can be swift.
"All of a sudden you get a massive swing in sentiment and you get some of the best returns," he says.
As the price of oil continues to fall, it will likely boost a wide range of stocks. But the gains will be more generous for the areas that were hit hardest by price spikes in the first place, and even a little bit of improvement on behalf of a company goes a long way when everyone in their cohort is failing the test.
KB Home exemplified that last week when it reported lower earnings, revenue and margins compared to the year prior. But management told analysts on the call that margins are expected to improve by more than an entire percentage point over the next several quarters. The stock rallied almost 17% the day after the report, and is now up 35% since this year's oil price and treasury yield peaks on May 19.
The company is just one example of the many housing stocks that have been ripping higher over the past month. Toll Brothers, which wasn't an official Barron's Investor Circle pick but was highlighted by Todd Chanko in our 2026 outlook piece, is up 31% over that period. Dan Victor's Rocket Companies stock pick has also gained 16% since May 19.
The good times for housing stocks might not be over, either. The market is still pricing in at least one Federal Reserve interest rate hike. But as new data comes in showing that inflation has likely peaked, Kantrowitz argues the Fed won't need to hike at all.
"Every piece of market inflation data has collapsed," says Kantrowitz, who points to things like one-year inflation swaps, which recently hit a low for the year.
To be sure, Fed chair Kevin Warsh struck a hawkish tone at his first press conference, and he didn't discuss any potential inflation decline in the coming months. He also doesn't want to give forward guidance for the rest of this year, and is only reacting to published data.
But if lower inflation numbers make their way to prominent gauges, Warsh's tone will likely shift, pushing down rate hike expectations and providing another boost to interest rate sensitive areas like housing.
If the Fed no longer wants to look ahead, that's a great gap for investors to take advantage of right now.
Chart of the Week
The major indexes are being held back by the artist formerly known as the "Magnificent Seven."
The above chart from Exhibit A Co-founder Matt Cerminaro shows that Apple, Alphabet, Microsoft, Amazon, Meta, Tesla and Nvidia have been a cumulative net negative on the S&P 500 this year.
Microsoft has been the main laggard, while Tesla and Meta have also struggled. The most common explanation is rather simple. Big tech giants are spending billions, maybe soon trillions, on the AI buildout. So investors are rotating into the companies that benefit from that spending, like Micron, rather than the spenders themselves.
Still, it's worth noting the S&P 500 is within striking distance of an all-time high with Tesla, Meta and Microsoft all down more than 25% from their most recent 52-week highs. It makes me wonder how high the benchmark indexes could go if the big players find another way to rally after several big years.
What to watch in the markets this week
-- Jobs in focus. The June jobs report will headline the week of scheduled
events on Thursday. Consensus expects 75,000 nonfarm payrolls were added
in the month, down from 172,000 in May. Meanwhile, the unemployment rate
is anticipated to hold flat at 4.3% for the fourth straight month.
-- A trickle of earnings. It won't be a busy week of quarterly financial
reports for investors to comb through, but results from Nike and
Constellation Brands on Tuesday, along with General Mills on Wednesday,
will provide another look at where consumers are spending right now.
-- Warsh speaks again. The Fed chairman is expected to speak at the ECB
Forum on Tuesday. Investors will be closely listening for any change of
tone after his first public comments as chair were viewed as hawkish.
-- More economic data. A holiday-shortened trading week will still feature a
slew of economic data including: S&P Case-Shiller 20-city index (Tuesday),
Job Openings and Labor Turnover Survey (Tuesday), Consumer confidence
(Tuesday), ADP Employment Survey (Wednesday), ISM manufacturing
(Wednesday). Markets are closed for the July Fourth holiday on Friday.
Live Q&A
Our next live Q&A show is on Wednesday July 29. Sign up for the show here.
Thanks to everyone who joined our latest live Q&A roundtable and asked questions! In case you missed it, I hosted Barron's editor-in-chief Ben Levisohn along with stock pick writers Teresa Rivas and Dan Victor to discuss finding winners in the market for the final six months of the year.
You can watch the full episode by clicking the image below.
On our Radar
💪 Software continues to struggle as a group amid broader concerns about how AI will displace certain areas of the industry. But a few of our stock picks in the space keep catching my eye. Both Palo Alto Networks and Okta were up more than 2% over the past week despite the market selloff. Zoom out over the full year and cybersecurity stocks are some of the only names that have weathered the software storm. If AI continues to be more pervasive, it's becoming clear that it will create a larger market for cybersecurity companies to provide their services.
👀 It's been nearly a year since Barron's recommended Berkshire Hathaway stock in July 2025. It has underperformed the S&P 500 by about 14% over that time period. Andrew Bary tells me the next key catalyst will come later this summer when investors learn if Berkshire has resumed a stock buyback. Andrew recently made the case that the stock could replace Nike in the Dow Jones Industrial Average.
In case you missed it
-- Revisiting Stock Picks Intel, Progressive, Bristol Myers Squibb -- Doug
Busch
-- AI Inflation is Officially Coming for Your Wallet -- Josh Schafer
-- Warfare Technology Is Changing in Real Time. This ETF Captures the Shift.
-- Dan Victor
-- There's Nothing Dim About Gentex. It Could Climb 40%. -- Todd Chanko
-- Home Is Where the Healing Is. Aveanna Healthcare Stock Is a Buy. -- Todd
Chanko
-- Ross Stores Defies the Age of E-Commerce. The Stock Has More Room to
Rally. -- Teresa Rivas
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(END) Dow Jones Newswires
June 29, 2026 21:01 ET (01:01 GMT)
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