The Average Stock is Having a Moment as Semiconductors Struggle. It's a Sign of a Healthy Market.

'It's kind of amazing that stocks aren't down more,' one strategist says

Major U.S. indexes had a tough week, but the average S&P 500 name managed to outperform.

It has been a good week to be average on Wall Street.

Semiconductor names continued to slide, giving back more of their historic gains from the second quarter. But the heavy losses in one of the market's most important sectors haven't caused much pain for the broader index. That's because as trendy chip stocks have come under pressure, shares of oil and gas companies, as well as retailers, banks and transportation names, have risen.

The group of elite tech stocks known as the "Magnificent Seven" have also sprung back to life in recent weeks after a rough stretch during the second quarter - although they ended up falling alongside semiconductors this week as the selloff engulfed the broader tech sector after an earnings warning from IBM $(IBM)$. Shares of Big Blue ended up tallying their worst week on record, according to data going back to 1972, Dow Jones Market Data showed.

Still, Wall Street strategists said that the recent choppiness in markets is looking more like a healthy rotation than the start of a deeper selloff. Although it has largely treaded water for the past six weeks, the S&P 500 SPX remains just 2% below its record closing high from June 2.

The S&P 500 SPX finished with a weekly loss on Friday for the second time in four weeks. But the equal-weighted version of the index - which Wall Street strategists see as a representative of the average stock - did somewhat better, outperforming its capitalization-weighted sibling by more than a percentage point.

Against the PHLX Semiconductor Index SOX, the equal-weighted S&P 500 RSP tallied one of its strongest relative showings in decades. The Invesco S&P 500 Equal Weight ETF put in its biggest weekly outperformance versus the iShares Semiconductor ETF SOXX since May 2009, according to Dow Jones Market Data.

"The average stock is outperforming right now," Adam Phillips, head of investments at EP Wealth, told MarketWatch on Friday. "But all the data right now suggest that this is a rotation. The recent leaders in semis have hit an air pocket, but I don't think the trade is over. Investors are just looking for something that seems a bit safer."

Semiconductor stocks started to struggle in late June. And they have remained under pressure, despite ostensibly strong earnings reports from Samsung (KR:005930), Taiwan Semiconductor $(TSM)$ and Micron $(MU)$.

"If a company reports good earnings and the stock doesn't go up, it tells you everybody is in that trade," said Stephanie Link, chief investment strategist and equity portfolio manager at Hightower Advisors.

Despite all of the wild swings under the surface in July, moves at the index level have been relatively calm lately. The S&P 500 fell by 1% on Friday, its first move of that magnitude in either direction since June 26, FactSet data showed.

Stocks have also surmounted another potential threat: The revival of the conflict between the U.S. and Iran. An announcement that the U.S. military had launched another round of strikes did appear to weigh on the market shortly before the closing bell on Friday.

"It's kind of amazing that stocks are not down more considering the abrupt turnaround in the Middle East combined with the chip-stock losses," said Gina Martin Adams, chief market strategist at HB Wealth. "But here we are."

As the tech sector has struggled, other corners of the market have picked up the slack. That's a healthy sign, Martin Adams said.

"Breadth is still very much intact," she said.

On Thursday, the percentage of S&P 500 stocks sitting above their 200-day moving average topped 69% for the first time since late 2024, Dow Jones Market Data showed. As of Friday's close, 66% of stocks in the index were trading above the key long-term trendline.

The Nasdaq Composite Index COMP saw another big pullback this week, falling 2.9%, the biggest drop since late June, FactSet data showed. The Dow Jones Industrial Average DJIA fell 490.59 points, or 0.9%, this week, its biggest drop since March.

-Joseph Adinolfi -Joy Wiltermuth

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(END) Dow Jones Newswires

July 17, 2026 17:55 ET (21:55 GMT)

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