The final full trading week of June featured a dramatic reversal of recent trends, as a sharp bout of profit-taking hit the artificial intelligence (AI) and technology sectors. This localized sell-off caused a stark divergence among the major benchmarks: the tech-heavy Nasdaq Composite tumbled -4.37% and the S&P 500 fell -1.91%, while the value-tilted Dow Jones Industrial Average bucked the trend, gaining +0.69% to notch a fresh record high.
As capital rotated away from mega-cap growth, defensive and traditional value sectors became the week's primary beneficiaries. Energy stocks also saw unique dynamics; WTI Crude fell -3.1% following a diplomatic breakthrough and deal between the U.S. and Iran to reopen the Strait of Hormuz, easing the geopolitical risk premium that has plagued the sector.
In fixed income, the bond market reacted favorably to the inline PCE data and the easing energy shock, with the 10-year Treasury yield slipping 6 basis points to close at 4.39%. Outside of equities, broader risk assets suffered alongside tech: Spot Silver plunged -10.83%, Gold slid -3.1%, and Bitcoin extended its recent decline, falling -6.3% on the week as the U.S. Dollar indexed higher (+0.58%).
· Shares of Apple (AAPL) slipped this past week, highlighted by a 6.1% drop on June 25, 2026, which wiped out roughly $160 billion in market value. The selloff was driven by a collision of hardware margin fears, regulatory hurdles, and broader macroeconomic headwinds. Surging demand for AI data centers sent DRAM and NAND flash memory prices skyrocketing (see below). Unable to absorb these costs, Apple raised prices by 15% to 25% across its MacBook and iPad lineups. Investors panicked over potential "demand destruction" and fewer unit sales. We believe the selloff is way overdone.
· Semiconductor Manufacturer, Micron Technology (MU), reported blowout earnings this past Wednesday. Regarding the lack of supply of Dynamic Random Access Memory (DRAM) as well NAND relative to demand, CEO Sanjay Mehrotra stated that “even as we expect supply to improve gradually in 2028, we currently do not have a line of sight as to when memory supply will be able to catch up with increasing demand.” Mehrotra added that demand will outstrip supply “beyond calendar 2027 as a result of AI-driven demand across all segments, coupled with structural supply constraints.”
· The results of the Federal Reserve’s 2026 annual bank stress test simulating a severe global recession to evaluate the resilience of the nation’s 32 largest financial institutions was released this past week. The stringent baseline assumed a 10% peak unemployment rate, a 39% collapse in commercial real estate (CRE) values, a 30% drop in housing prices, and a 58% equity market plunge. All 32 tested banks successfully passed, remaining comfortably above minimum regulatory capital thresholds. The banking sector was projected to absorb $708 billion in cumulative loan losses over nine quarters. Defaults were led by $200 billion in credit cards, $160 billion in commercial and industrial (C&I) loans, and $75 billion in CRE portfolios. Finally, the industry’s aggregate Common Equity Tier 1 (CET1) capital ratio experienced a manageable drop, falling from a 12.8% baseline to a trough of 11.2% before stabilizing. High net interest margins entering the exam helped blunt more severe capital erosion.
Economic Data That Drove Market Sentiment This Past Week…
· The University of Michigan reported that its Final June Reading of Consumer Sentiment rose to 49.5 (-18.5% y/y) from a preliminary June level of 48.9 and from a final May 44.8. The final June expectations component rose to 50.7 (-12.7% y/y) from a preliminary June 49.3 and from a final May 44.1. Lastly, the final June current conditions component slipped to 47.7 (-26.4% y/y) from a preliminary June 48.4, but rote from a final May 45.8. According to the Survey of Consumers Director, Joanne Hsu, “this measured improvement in sentiment was widespread, seen across age, education and political party. Lower-income consumers exhibited a particularly strong sentiment increase, consistent with the fact that gasoline comprises a larger share of their budgets.” (Source, Univ of Michigan)
· First Quarter Gross Domestic Product (first revision), as reported by the Commerce Department, a tally of the output of all goods and services in the United States, rose at an annualized rate of 2.1% (2.6% y/y), up from a previously revised 1.6% and a substantially improvement from 0.5% recorded during Q4. Real Final Sales to Domestic Purchasers rose at a revised annualized rate of 2.2%, down from a previously reported 2.4% and up from 1.8% during the fourth quarter. Government Spending (Government Consumption Expenditures and Gross Investment), rebounded by an unrevised 4.4%, in great part due to the reopening after the shutdown. The PCE Price Index rose at a revised annual rate of 4.6% during Q1, compared to a second estimate of 4.5% and 2.9% during Q4-2025. While the PCE Price Index Excluding Food and Energy rose at an unrevised SAAR of 4.4% during that same quarter, up from an initially recorded 4.3%. (Source, U.S. Bureau of Economic Analysis)
· The Bureau of Economic Analysis reported that Personal Income rose 0.7% during May after remaining unchanged in April. However, after adjusting for inflation, Personal Income rose 0.7% during May after sliding 0.1% in April. Consumer spending, or Personal Consumption Expenditures rose 0.7%, after climbing 0.4% during April. However, when adjusting for inflation, real consumer spending edged up by 0.3%. Inflation remains a key factor, as the PCE Price Index rose 0.4% for the month and by 4.1% year-over-year. The core index, which excludes volatile food and energy costs, rose 0.3% from the previous month and by 3.4% y/y. Amidst these shifts, the Personal Saving Rate jumped to 3.0% of disposable income, up from 2.6% in April.
· Orders for Durable Goods (those expected to last at least three years) rose 4.5% during May, after rising 8.5% during April. Smoothing out the m/m volatility, Orders for Durable Goods have slipped -3.5% y/y. Transportation Equipment Orders plunged 14.0% (-22.1% y/y), after rising 22.4% the prior month. Excluding transportation, new orders rose 1.3% during May (10.2% y/y), after rising 1.4% during April. (Source, U.S. Census Bureau)
· The U.S. Census Bureau reported that New Single-Family Home Sales fell 46,000 during May to a Seasonally Adjusted Annualized Rate (SAAR) of 580,000 from 626,000 during April (-6.8% y/y). Sales of New Homes have fallen 43.7% from their peak of 1.031 million in October 2020 and 54.7% from the peak in July 2005 of 1,279,000 units. However, they have risen 11.8% above their July 2022 low of 519,000. The median sales price of a new home rose 2.0% (0.0% y/y) to $424,900 in May from $416,500 in April, this as the average sales price of a new home rose 7.8% (5.0% y/y) to $540,600 in May from $501,400 in April. The average price is just 0.1% below the high of $541,200 in July 2022. These sales prices are not seasonally adjusted. The number of unsold new homes on the market rose 2.3% to 496,000 (-1.4% y/y) from 485,000 in April. The seasonally adjusted months’ supply of new homes for sale rose to 10.3 months in May from 9.3 in April as the median number of months a new home stayed on the market rose to 3.7 months during May from 3.6 during April, well off the high of 5.1 months in March 2021. (Source, U.S. Census Bureau)
Economic Reports scheduled to be released this week, include the following – on Tuesday, June Consumer Confidence from The Conference Board; on Wednesday, May Construction Spending; on Thursday, Initial Weekly Claims for Unemployment Benefits, May Factory Orders and the June Non-Farm Payroll Report to include the June Unemployment Rate.
Several potentially market moving companies are scheduled to report earnings, to include AeroVironment (AVAV), Nike (NKE), Constellation Brands (STZ), National Beverage (FIZZ), Greenbrier (GBX) and Lindsay (LNN).