U.S. equity markets ended the week on a subdued note, with the spotlight shifting sharply toward technology and semiconductor stocks as investor sentiment turned cautious. The Nasdaq 100 slid 1.09% in after-hours trading, outpacing declines in the broader Nasdaq Composite, which fell 0.24% to 25,297.62. The S&P 500 edged down 0.06% to 7,353.21, while the Dow Jones Industrial Average slipped 0.09% to 51,873.95. The small-cap Russell 2000 dropped 0.42%.
The real story, however, lay in fund flows. According to LSEG Lipper data, U.S. equity funds experienced $3.53 billion in outflows for the week ended June 24, a sharp reversal from the previous week's $37.63 billion inflow. Tech sector funds alone bled nearly $20 billion, completely erasing the prior week's record $21.46 billion inflow. This round-trip of roughly $41 billion underscores the volatile nature of the AI-driven trade that has dominated markets this year.
Chip stocks were particularly hard hit. The PHLX semiconductor index tumbled over 4% and was on track for a weekly decline of about 7%, its worst since March. Apple Inc. (NASDAQ: AAPL) managed a slight rebound after dipping Thursday on news of higher-priced iPads and MacBooks, but other names fared worse. Micron Technology Inc. (NASDAQ: MU) remained under pressure despite earlier strong earnings that had briefly steadied the sector.
Analysts offered mixed views on the selloff. David Stubbs, chief investment strategist at AlphaCore Wealth Advisory, told Reuters that “profitability and the capex story are certainly not going away,” suggesting the underlying fundamentals remain intact. Art Hogan at B. Riley Wealth noted that Apple's price increases signaled “renewed inflationary pressure,” adding another layer of concern for rate-sensitive growth stocks.
In contrast, the healthcare sector emerged as a safe haven. The S&P 500 healthcare index gained 2.5%, leading all 11 S&P sectors and providing a buffer against the tech rout. Moderna Inc. (NASDAQ: MRNA) jumped 12.79% in late trading after its investor event, topping the S&P 500 gainers list. ON Semiconductor Corp. (NASDAQ: ON) was the biggest loser, dropping 23.84% after agreeing to buy Synaptics Inc. (NASDAQ: SYNA) in an all-stock deal valued at about $7 billion.
The rate outlook continues to weigh on tech. A Reuters poll showed over three-quarters of economists expect the Federal Reserve to hold rates at 3.50%–3.75% through 2026, but markets are pricing in potential hikes after inflation topped 4%. Stephen Juneau at Bank of America remarked that the Fed's “reaction function has turned,” leaving investors wary. Next week's payrolls data will be a critical test; strong numbers could reignite rate-hike fears, as noted by Doug Huber of Wealth Enhancement and Brad Conger of Hirtle & Co.
Oil prices provided some relief, with Brent crude falling 4.24% to $72.07 a barrel on easing supply worries. Lower energy costs could help cool inflation, but Friday's focus remained firmly on chip prices, AI budgets, and the sustainability of debt-fueled growth stories. U.S. markets will be open for trading next week but will close early on Friday, July 3, for the observed Independence Day holiday.
