U.S. equity markets diverged sharply at midday on Monday, with the tech-heavy Nasdaq Composite falling 0.9% and the S&P 500 slipping 0.4% by 11:15 a.m. EDT, as a renewed selloff in memory-chip shares collided with a 4.5% surge in Brent crude oil to $79.41 a barrel. The Dow Jones Industrial Average eased just 0.2%, a far more modest decline than its tech-focused counterparts.
Beneath the surface, however, a more telling signal emerged. At approximately 11:54 a.m. EDT, the equal-weight S&P 500 ETF (NYSEARCA:RSP) was up 0.18%, while the standard market-cap-weighted S&P 500 ETF (NYSEARCA:SPY) lost 0.43% — a gap of 0.62 percentage points. The divergence was even starker against the Nasdaq-100 fund (NASDAQ:QQQ), where the equal-weight fund held a 1.54 percentage point advantage. Equal weighting assigns each company the same influence, unlike traditional indexes where the largest firms dominate.
Market breadth — the ratio of advancing to declining stocks — supported this narrow-selloff interpretation. At 9:59 a.m., advancers outnumbered decliners by 1.26-to-1 on the NYSE and 1.36-to-1 on the Nasdaq, even as the technology sector fell 1.3%. Alex Guiliano, chief investment officer at Resonate Wealth Partners, noted that the conflict is “testing whether the stock market’s broad-based growth can hold.” Peter Andersen, founder of Andersen Capital Management, added that consumers are “showing remarkable resilience” and that banks should “probably do fairly well” as earnings season begins.
The rotation was clearly visible within the Dow. Chevron (NYSE:CVX) rose 2.19% alongside oil, IBM (NYSE:IBM) gained 2.07%, and UnitedHealth Group (NYSE:UNH) added 0.95%. This left a stark 6.12-percentage-point gap between the energy sector and the semiconductor fund — a far cry from the usual pattern of a market-wide dash for cash.
The chip selloff also revealed a listing anomaly. SK hynix’s American depositary receipts (NASDAQ:SKHY) fell 7.9% to $154.70 in early trade, yet still commanded a 25.6% premium over the Seoul-listed equivalent. Cross-asset analyst Nic Puckrin warned that premium “likely won’t hold forever,” while Phil Blancato of Ladenburg Thalmann attributed the move to “obviously a component of profit taking.” Jing Jie Yu of Morningstar (NASDAQ:MORN) cautioned that new memory capacity arriving in 2027 and 2028 could bring “price erosion.”
Other U.S.-traded chip stocks also declined, though the magnitude varied. Micron Technology (NASDAQ:MU) fell 4.71%, Sandisk (NASDAQ:SNDK) dropped 10.24%, Nvidia (NASDAQ:NVDA) lost 1.86%, and Taiwan Semiconductor (NYSE:TSM) slipped 1.15%. Despite the stock-price weakness, underlying business data remains robust: Taiwan Semiconductor reported quarterly revenue up 36% year-over-year, including a 68% jump in June alone. FactSet (NYSE:FDS) expects nearly 24% earnings growth for S&P 500 companies in the second quarter, with technology projected to grow more than 60%, while six of the 11 sectors are forecast to grow less than 10%.
The rotation, however, has its limits. Tuesday brings the release of the consumer price index — a broad inflation gauge — and Federal Reserve Chair Kevin Warsh’s first congressional monetary-policy testimony, with oil near $80 and Treasury yields elevated. Interest-rate markets currently assign a 68% probability of a September rate increase. A hotter-than-expected inflation reading or a prolonged disruption in the Strait of Hormuz could transform the narrow tech unwind into a broader selloff, particularly for smaller companies whose financing costs are more sensitive to rate changes.
For the remainder of the trading session, the key indicator to watch is whether the equal-weight fund remains positive while the Nasdaq stays under pressure. If it does, investors are rotating rather than fleeing. If it does not, Monday’s resilience may prove only a morning reprieve.
