NEW YORK, July 19, 2026 — Last week, the S&P 500 fell 1.6%, while the semiconductor index (SOX) suffered a steep 10.0% decline, according to Reuters data. Despite the sharp drop in chip stocks, the broader market has so far avoided a significant downturn. Early data from LSEG indicates that 90% of the 49 S&P 500 companies that have reported so far have surpassed earnings forecasts, providing a crucial buffer.
The resilience of the broader index is notable given the increased weight of chipmakers. Paul Nolte, senior wealth adviser at Murphy & Sylvest, noted that the chip sector’s weighting in the S&P 500 has surged to over 20%, up from about 8% three or four years ago. Based on this concentration, if the chip weighting had fallen in line with the SOX decline, it would have shaved roughly two percentage points off the S&P 500. However, the index only slipped 1.6%, indicating that gains in other sectors offset the chip weakness.
Five key readings illustrate the current market balance:
- Broad tape: The S&P 500 fell 1.6%, the Nasdaq lost 2.9%, and the Dow dropped 0.9% last week. Growth stocks led the decline, with decliners outpacing advancers by nearly two-to-one on the NYSE on Friday.
- Chip concentration: The SOX declined 10.0%, and chipmakers now account for more than 20% of the S&P 500’s weighting, amplifying volatility.
- AI split: The SOX is up about 65% year-to-date, while the S&P software and services index is down around 17%, reflecting a divergence that favors hardware suppliers over software consumers.
- Earnings floor: Early data shows 90% of 49 reporting companies have beaten estimates, with projected S&P profit growth rising to 26.0% from 19.2% as of April 1.
- Oil and rates: Brent crude rose approximately 16% for the week, closing at $88.10, while the 10-year Treasury yield finished at 4.55%. Core CPI was unchanged in June, offering some support to bonds.
The market’s cushion may be wearing thin. “It’s like the market has chip fatigue,” said Ryan Detrick, chief strategist at Carson Group. The SOX ended 20.2% below its June 22 peak, confirming a bear market for the sector. AI-related investment has also created a divide: while the SOX has climbed roughly 65% this year, the S&P software-and-services index has dropped around 17%, a difference of about 82 percentage points that benefits suppliers more than software consumers.
Earnings remain the primary counterbalance. Projected S&P 500 profit growth has risen to 26.0%, up 6.8 percentage points from April 1. The valuation outlook reinforces this view: the S&P 500 was trading at close to 20 times forward earnings on July 10, down from 21 times in late May, suggesting that recent advances have been driven more by earnings forecasts than by multiple expansion.
Oil prices moved in the opposite direction, with Brent crude rising roughly 16% over the past week to $88.10. The 10-year Treasury yield slipped 1.2 basis points over five sessions to 4.55%. Core consumer prices were unchanged in June, which offered some support to bonds, but energy prices dropped 5.7% during the period. A rise in crude could offset that benefit ahead of the Federal Reserve’s July 28-29 meeting.
Alphabet (GOOGL) will be in focus on Wednesday when it reports earnings. Investors are expected to scrutinize AI investments and data center spending. Kevin Mahn, chief investment officer at Hennion & Walsh, cautioned about “ripple effects across the entire AI ecosystem” if there is any slowdown. Intel (INTC), Texas Instruments (TXN), and Tesla (TSLA) are also scheduled to report. Over 80 S&P 500 companies are set to release results next week. Intel shares have climbed more than 160% this year, while Texas Instruments has gained around 60%, keeping expectations elevated.
Investor focus has shifted toward guidance over earnings beats. Robust outlooks are needed to counteract weakness in chipmakers and inflationary headwinds from oil. Risks remain: the chip-weight calculation is for illustration only, and the earnings sample is still at an early stage. Gulf attacks escalated over the weekend, and Hormuz tanker movements declined sharply, raising the risk of higher oil prices. Disappointing AI outlooks could also trigger a broader selloff.
