Mega-Cap Weakness Masks Broad Market Rotation as Dow Advances

Stocks began the first full trading week between two holiday-shortened weeks on a mixed note, as renewed weakness among several mega-cap growth names weighed on the S&P 500 and Nasdaq Composite, while broader market strength helped the Dow Jones Industrial Average finish higher. The S&P 500 declined 0.4%, the Nasdaq Composite fell 1.3%, and the Dow added 0.3%.

The market opened with a constructive tone after reports from both Washington and Tehran indicated that negotiations between the United States and Iran continue to make meaningful progress. Semiconductor stocks also extended their recent momentum early in the session. However, selling pressure across several of the market’s largest growth stocks quickly overwhelmed those gains, sending the major averages into negative territory for most of the day.

Communication services emerged as the weakest sector, falling 3.8%. Alphabet was among the market’s biggest losers after reports that John Jumper, a senior engineering leader at Google DeepMind, will leave the company to join Anthropic. The news added to investor concerns surrounding Alphabet’s aggressive AI spending plans and contributed to further weakness in the stock, which has now fallen nearly 8% during June.

Meta Platforms also moved lower, while Netflix dropped to its lowest level since late 2024, adding further pressure to the sector.

The consumer discretionary sector declined 2.3%, weighed down by weakness in Amazon ahead of its Prime Day event. Broad selling across major growth names pushed the Vanguard Mega Cap Growth ETF down 1.4% and contributed heavily to the Nasdaq’s underperformance.

SpaceX remained under pressure as well, falling more than 16% and extending its post-IPO correction for a third consecutive session. The sharp decline in the high-profile stock further weighed on technology-heavy indices.

Despite the weakness in several mega-cap names, the information technology sector managed to finish essentially unchanged. Microsoft declined more than 3%, while NVIDIA also closed lower. However, strong gains elsewhere within the semiconductor and AI infrastructure space helped offset those losses.

Micron continued its impressive run ahead of Wednesday’s earnings report, climbing nearly 7%. AI infrastructure beneficiaries also attracted buyers, with Super Micro Computer surging more than 15% and Corning gaining nearly 8%.

The resilience across semiconductor-related stocks helped prevent a deeper decline in the broader technology sector and highlighted investors’ continued enthusiasm for AI infrastructure spending.

Beneath the surface, market participation was healthier than the headline index performance suggested. Seven of the eleven S&P 500 sectors finished higher, reflecting a continued rotation away from mega-cap growth stocks and into other areas of the market.

Real estate led the advance with a gain of 1.4%, while the energy sector added 1.2% despite another decline in crude oil prices following last week’s sharp retreat. Health care also outperformed, rising 0.9%.

AbbVie was a standout within the health care sector after announcing an agreement to acquire Apogee Therapeutics for $135.11 per share in cash. Shares of Apogee surged nearly 47%, while AbbVie gained more than 6%.

Small- and mid-cap stocks also outperformed. The Russell 2000 rose 0.8%, while the S&P MidCap 400 gained 0.4%, reinforcing the view that capital leaving mega-cap technology stocks was being redeployed elsewhere in the market rather than exiting equities altogether.

Overall, Monday’s session was defined by ongoing pressure in several of the market’s largest growth stocks, which masked otherwise constructive underlying action. The strength across seven S&P 500 sectors, combined with gains in small- and mid-cap benchmarks, suggests investors remain engaged in the market even as leadership continues to broaden beyond the mega-cap technology cohort that has dominated much of the year.

Our FTInvest 11 model portfolio surged 2.57% to close at 989.24, delivering its strongest daily gain in nearly a month and recovering a significant portion of the losses sustained during the recent correction. The advance lifts the portfolio back toward the 1,000 level and reduces the drawdown from the all-time high of 1,078.93 to approximately 8.3%, moving FTInvest 11 out of correction territory.

FTInvest 11 is now up approximately +6.58% year-to-date. Most of today’s gain was driven by a strong rebound in the portfolio component that had been under heavy pressure due to liquidity concerns. Following the resolution of those liquidity issues over the weekend, the stock recovered sharply, providing a significant boost to overall portfolio performance. While recent volatility has highlighted the risks associated with company-specific events, today’s recovery demonstrates how quickly sentiment can improve once uncertainty is removed. The portfolio’s disciplined, value-driven investment approach remains focused on long-term fundamentals and capital appreciation.