Stock Market Update

[BRIEFING.COM] The S&P 500 (-1.0%), Nasdaq Composite (-1.5%), and DJIA (+0.2%) are mostly lower again today as semiconductor stocks move sharply lower while the broader market maintains a positive tilt.

The PHLX Semiconductor Index is down 7.1%, and while the move lacks a clear corporate catalyst, it followed a nearly 10% overnight decline in South Korea's Kospi, driven in part by significant losses in SK Hynix and Samsung Electronics. Bloomberg also reported that South Korea's top financial regulator expressed regret over allowing several leveraged ETFs tied to the two stocks to launch.

The weakness in SK Hynix spilled over to U.S. memory names, while the magnitude of the decline likely renewed concerns about concentration risk in technology-heavy indices. Lingering capital expenditure concerns and quarter-end rebalancing are also touted as contributing factors to today's pullback.

Memory names Sandisk (SNDK 1989.00, -284.73, -12.52%) and Micron (MU 1078.25, -133.13, -10.99%) trade sharply lower, while other semiconductor names such as onsemi (ON 118.59, -12.96, -9.85%) and Lam Research (LRCX 372.90, -36.64, -8.95%) post similar losses.

The information technology sector (2.8%) is unsurprisingly the worst-performing S&P 500 sector, though there are a few pockets of strength. IBM (IBM 265.64, +13.42, +5.32%) is the best-performing Dow component after JPMorgan upgraded the stock to Overweight from Neutral with a target of $291, while several mega-cap names, including Microsoft (MSFT 373.00, +5.66, +1.54%) and Apple (AAPL 299.13, +2.12, +0.71%), recover some of yesterday's weakness.

Tesla (TSLA 384.97, -20.08, -4.96%) is not among the mega-cap group that is stronger today, providing weak leadership for the consumer discretionary sector (-0.6%).

Carnival (CCL 28.58, -1.61, -5.33%) is a post-earnings laggard in the sector after the company beat EPS expectations but issued downside forward guidance.

Elsewhere, electrical product names such as GE Vernova (GEV 1052.78, -74.82, -6.63%) and Vertiv (VRT 325.65, -32.31, -9.03%) move sharply lower in tandem with semiconductor stocks, weighing on the industrials sector (-1.2%).

Meanwhile, seven S&P 500 sectors trade higher as investors once again rotate into other pockets of the market as mega-cap tech lags this week. Defensive sectors are posting the widest gains amid elevated volatility today, with the consumer staples sector (+1.6%) leading the advance as a host of food names bounce off multi-year lows.

The health care (+1.1%) and utilities (+0.9%) sectors are also outperforming, while the real estate sector (+1.4%) remains the best-performing sector this week.

Despite the rotational strength in the broader market, the Russell 2000 (-0.3%) is pulling back from yesterday's record highs, while the S&P Mid Cap 400 (-0.4%) holds a similar loss.

Overall, today's pullback appears more concentrated than broad-based. Semiconductor weakness is exerting significant pressure on the major averages, but lower oil prices, softer Treasury yields, and strength across several defensive and rate-sensitive sectors suggest the move is being driven more by positioning and rotation than a wholesale shift away from equities.

Reviewing today's data:

• June S&P Global U.S. Manufacturing PMI - Prelim 55.7; Prior 55.1
• June S&P Global U.S. Services PMI - Prelim 51.3; Prior 50.7