AI Stocks Are Pulling Back. Here’s What’s Leading Instead
Market Commentary
Markets are moving higher in 2026, but leadership is changing beneath the surface.
The S&P 500 is up about 9.3% year to date, while small caps (Russell 2000) have surged roughly 19%. International stocks are also slightly outperforming. Meanwhile, the Magnificent Seven are up just 1.6%, lagging the broader market.
Semiconductor stocks, after a strong run, have recently pulled back about 18% over two weeks, even as the S&P 500 has remained relatively stable.
This rotation may reflect investors taking profits from high-performing AI and semiconductor names and reallocating into more traditional sectors, often a sign of broader market participation rather than weakness.
On the economic front, job growth is slowing. June added about 57,000 jobs, with prior months revised lower. Average monthly gains are now closer to 75,000, down from earlier expectations of 150,000–200,000.
While slower growth may seem concerning, it could ease pressure on the Federal Reserve to raise interest rates, potentially supporting markets.
Key Takeaways
Market gains are broadening beyond mega-cap tech leaders
Small caps and international stocks are outperforming
Semiconductor stocks are experiencing a short-term pullback
Slower job growth may reduce pressure on the Fed to raise rates
Market rotation can signal healthy consolidation rather than weakness
Watch the latest Market Commentary with Rick Wedell for more perspective on what these shifts could mean for investors.
AI Stocks Are Pulling Back. Here’s What’s Leading Instead
Markets are moving higher in 2026, but leadership is changing beneath the surface.
The S&P 500 is up about 9.3% year to date, while small caps (Russell 2000) have surged roughly 19%. International stocks are also slightly outperforming. Meanwhile, the Magnificent Seven are up just 1.6%, lagging the broader market.
Semiconductor stocks, after a strong run, have recently pulled back about 18% over two weeks, even as the S&P 500 has remained relatively stable.
This rotation may reflect investors taking profits from high-performing AI and semiconductor names and reallocating into more traditional sectors, often a sign of broader market participation rather than weakness.
On the economic front, job growth is slowing. June added about 57,000 jobs, with prior months revised lower. Average monthly gains are now closer to 75,000, down from earlier expectations of 150,000–200,000.
While slower growth may seem concerning, it could ease pressure on the Federal Reserve to raise interest rates, potentially supporting markets.
Key Takeaways
Watch the latest Market Commentary with Rick Wedell for more perspective on what these shifts could mean for investors.