The bulls could cling to something worthy while they watch semiconductor stocks such as Sandisk (SNDK) and Micron (MU) get blown to pieces.
About 72% of S&P 500 stocks are now trading above their 200-day moving average, the strongest market breadth since December 2024, according to data from Barchart (see below). The benchmark index is also holding near record highs.
“You’ve got essentially two-thirds of S&P 500 companies that are trading above their 200-day moving average. That’s relatively healthy and still consistent with the market that is more rotational in nature and not necessarily one that is correctional,” Charles Schwab strategist Kevin Gordon said on Yahoo Finance’s Opening Bid.
Investors have cashed in their AI bets and have rotated into software, financials, industrials, healthcare, and consumer discretionary stocks for their perceived values. A strong earnings season from many companies, like Coca-Cola (KO) on Tuesday, has helped offset the negative tones stemming from reports out of Alphabet (GOOGL) and Tesla (TSLA).
The market has also been supported by resilient economic data, continued expectations for Federal Reserve rate cuts over the next year, and robust corporate profit growth, all of which have kept money flowing into stocks.
In addition, the S&P 500’s diversified makeup means gains in companies outside of semiconductors — including software firms, internet platforms, banks, and retailers — have cushioned the impact of declines in Nvidia (NVDA), AMD (AMD), Broadcom (AVGO), and other chipmakers.
Ultimately, investors increasingly view the semiconductor summer rout as a repricing of AI infrastructure expectations rather than a signal that the broader US economy or corporate earnings outlook is poised to fall off a cliff.
Gordon said, ” I don’t necessarily take a negative economic message from it [the chip sell-off]. From a GDP side of things, I don’t necessarily think that the sell off you can directly attribute it to what’s going to happen sort of in the economy.”
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the ‘Power Players With Brian Sozzi’ podcast and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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