7/1 US Stock Market—Strength in Finance and Communications amid AI Semiconductor Adjustment… Mixed Start to Wall Street's Third Quarter

July 01, 2026 Market Analysis

## 1. Today's Market at a Glance: "AI Semiconductor Heat Cools, Finance and Communications Take the Baton"

On July 1st (Wednesday), the US stock market began the third quarter with indices and sectors clearly diverging.

- S&P 500: Slight decline of approximately -0.2% (apnews.com)

- Dow: Slight decline near flat (apnews.com)

- Nasdaq: Decline of -0.6~0.7%, dragged down by sharp declines in tech stocks, particularly AI semiconductor-related shares (apnews.com)

While the indices show no major moves on the surface, the key point is that sector and individual stock directions have diverged significantly beneath the indices:

- Financials +2.6%, ranking 1st among 11 sectors

- Communications Services +2.0%, Consumer Staples +1.4%, Healthcare +1.3% and other defensive/platform sectors showing strength

- In contrast, Energy -1.2%, Utilities -1.1%, Technology -0.2%, Industrials -0.6% and others showed weakness

Key Message:

While the AI and semiconductor theme that dominated the market through last quarter briefly cools from overheating,

- Finance benefits from expectations of regulatory easing and interest rates,

- Communications Services benefits from platform advertising and digital services momentum,

- Consumer Staples and Healthcare with strong economic resilience take the baton in this rotation.

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## 2. Background to Today's Move: "Manufacturing Slowdown + Interest Rate Uncertainty + AI Overheating Fatigue"

### 2-1. Manufacturing Indicators: Neither Too Hot nor Too Cold Signal

As the US manufacturing indicators released today came in somewhat weaker than expected, rates fell early in the session, which served as a short-term positive for growth stocks and risk assets. (apnews.com)

- Meaning: With no strong signals of economic overheating,

→ The interpretation is that the Fed's justification for further aggressive rate hikes has weakened.

- However: Rates are already in the 3.5~3.75% range, and awareness is spreading that the possibility of one additional rate increase within 2026 remains open. (reddit.com)

What This Means for You:

- The possibility of the worst-case scenario of a sharp surge in long-term rates shaking stocks and real estate has diminished, but

- This is also a period where we need to abandon excessive expectations that the Fed will immediately cut rates and release more liquidity.

### 2-2. AI Semiconductors: Sharp Braking After "Best Quarter Ever"

The main culprit dragging down the Nasdaq today was AI-benefiting semiconductor stocks.

1. Context: Right after a historic rally at record levels

- The Philadelphia Semiconductor Index surged approximately 88% in just the last quarter, recording the highest quarterly gain rate in history. (axios.com)

- Memory and equipment makers (Micron, KLA, etc.) had many stocks that more than doubled during the last quarter. (axios.com)

2. Today: Profit-Taking + Valuation Fatigue

- Micron, KLA, Teradyne, Sandisk, etc. memory and testing equipment stocks fell about -10%, leading the decline in the technology sector. (latimes.com)

- The background includes concerns about "valuation" that rose "too much, too quickly," and

- News related to AI infrastructure efficiency (achieving the same performance with less hardware) raised concerns that future demand may be weaker than expected. (reddit.com)

So, what about the technology sector today?

- Looking at the trend over the past 7 days, technology rose for three consecutive trading days (about +2.5% or more) from June 26 to 30, and then slightly rested today at -0.16%.

- In the medium term, it still shows a strong upward trend of over +30% in the past three months, but it has entered a gentle adjustment phase of about -5% since early June (based on sector portfolio trend).

Summary for investors:

- For investors who already have a large proportion of AI and semiconductors, it is important to consider that short-term adjustments like today may occur more frequently than usual.

- If the proportion is still low, a phased approach during the adjustment period may be more reasonable than chasing highs.

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## 3. Sector Story: Where is the money flowing in and out?

### 3-1. Finance: "Regulatory easing + digital capital market" expectations created the No. 1 sector

The finance sector ranked first today with a gain of +2.61%.

- In particular, digital assets and retail brokers such as Coinbase (COIN) +8.7%, Robinhood (HOOD) +8.4% showed strength.

- S&P Global (SPGI), a large financial information and index provider, also surged +7.7%, supporting the finance sector rally.

Why is it rising?

1. Regulatory environment easing expectations

   - The atmosphere that cryptocurrency and tokenized asset regulations are "not easing, but not tightening for the time being" is highlighting the growth potential of related platforms again. (Comprehensive interpretation of various news and opinions)

2. Balance of interest rate and economic environment

   - Although benchmark interest rates remain at high levels, traditional finance enjoys an advantage in terms of interest margins,

   - The pace of economic slowdown is slowing down, and large-scale default risks are not yet clearly visible. (reddit.com)

3. Medium-term trend:

   - Based on sector portfolio, finance has risen about +12% since April, continuing a gentle upward trend.

   - Since mid-June, it has entered another short-term uptrend (about +2.6%), so today's strength is not significantly deviating from the trend.

Meaning for you:

- It can be seen as a signal that capital is starting to flow into the 'value and income' sector, which has relatively less valuation burden compared to AI growth stocks.

- In terms of portfolio, if the proportion of technology/growth is too high, consider increasing the finance proportion to reduce volatility.

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### 3-2. Communication Services: "Platform, Advertising, and Cloud Triangle Formation"

The communication services sector ranked second today with a gain of +2.05%.

- Meta Platforms (META) surged about +8~9%, leading the sector's rise. (www2.stockmarketwatch.com)

- Advertising and marketing platform AppLovin (APP) +9.45%, and advertising technology company The Trade Desk (TTD) +5.9% also showed strength.

Background Summary:

1. AI Infrastructure → AI Service Shift

   - The AI investment story that had been focused on "hardware (semiconductors, servers)" is now shifting towards AI services.

- Today, it has moved towards "platforms, advertising, and cloud service companies that actually make money using this infrastructure."

2. Meta's Commercialization Plan for Cloud·AI Computing

- Meta announced a plan to expand its cloud·AI infrastructure business by selling its AI computing resources to external customers,

- and emerged as a new competitor and growth axis in the existing structure centered on the three major cloud companies (Apple, MS, Google).

3. Short-term and Mid-term Trends:

- In the 7-day data, communication services fluctuated after a recent drop of -0.9%, followed by +1.97%, +1.14%, -0.84%, and a rise of +2.05% today,

- and in terms of sector trends, it has been expanding the top of the box range while rising and adjusting during the last quarter.

What This Means to You:

- Unlike AI hardware, platform and advertising companies have a "real revenue pipeline" story with users, advertisers, and cloud customers.

- However, due to high volatility and regulatory risks (content, monopoly issues), etc., diversifying into sector ETFs or large-cap stocks is relatively safer than focusing on individual stocks.

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### 3-3. Consumer Staples·Healthcare: "Defensive Sectors Shine Brighter as Recession Concerns Grow"

Consumer Staples (+1.37%) and Healthcare (+1.30%) both ranked in the top tier.

- In Consumer Staples, food companies such as General Mills (GIS) +8.5%, Kraft Heinz (KHC) +5.9%, and Conagra Brands (CAG) +5.9% showed strength.

- In Healthcare, Elevance Health (ELV) +7.7%, Align Technology (ALGN) +7.6%, and Centene (CNC) +6.8% stood out.

Why Defensive Stocks Now?

1. Manufacturing Slowdown = Growth Rate Adjustment Signal

- As manufacturing slows down and overheating adjustments appear in AI-related stocks,

- investors begin to think, "What if the growth rate doesn't meet current expectations in 2-3 years?"

2. Sectors Chosen at Such Times

- People eat, drink, and go to the hospital even when the economy is bad.

- Therefore, sectors such as food, daily necessities, health insurance, and pharmaceuticals regain attention because their cash flow and dividends are relatively stable despite a somewhat bland growth story.

3. Short-term Trends:

- Consumer Staples rose +1.45% over the past week, followed by adjustments of -0.55% and -1.85%, before rebounding to +1.37% today.

- In terms of sector trends, it has maintained an upward trend between April and June, so today's movement is close to "returning to normal track after a short adjustment."

What This Means to You:

- Rather than trying to predict the economy, it's important to hold assets that can withstand both booms and busts.

- If your technology and finance holdings are already large, consider a strategy of diversifying 10-20% with Consumer Staples and Healthcare ETFs as portfolio insurance.

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### 3-4. Technology·Industrials: "AI Overheating Adjustment + Economic Sensitivity Taking a Breather"

Technology (-0.16%) and Industrials (-0.57%) experienced slight declines.

- Within Technology, semiconductor and equipment stocks such as Corning (GLW -13.7%), KLA (KLAC -11.8%), Teradyne (TER -11.7%), Sandisk (SNDK -11.7%), and Micron (MU -11.0%) plummeted.

- Industrials rose +2.0%, -0.8%, +0.34%, and +0.97% over the past week, but fell -0.57% today, indicating a short-term rally followed by a breather.

Mid-Term Context:

- Technology: The sector portfolio has risen over +30% in the past 60 trading days, showing a strong upward trend, but it has been in an adjustment phase of around -5% since early June.

- Industrials: It has risen about +11% since April and continued its upward trend after a mid-May adjustment. Today's decline is closer to a short-term overheating adjustment rather than a trend reversal.

What This Means to You:

- Technology and semiconductors remain key axes for long-term growth,

- In a market with increased short-term volatility, the strategies of 'long-breath investors' who aim to buy at lows and short-term investors who follow momentum trends are completely different.

- Industrial metals can be seen as assets betting on the soft landing scenario (a gradual slowdown without a crash) for the economy.

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### 3-5. Energy·Utilities·Materials: "Sectors under low growth pressure from interest rates and raw material prices"

Today, energy -1.19%, utilities -1.10%, and materials -0.2% all showed weakness.

- With oil and natural gas prices unable to break out of their recent range,

- Long-term interest rates remain high, making utilities less attractive as they lack strong growth stories beyond dividends. (legacygr.com)

Mid-term trend:

- Energy: Sector portfolio has fallen by more than -10% since April, continuing a downward trend since mid-May.

- Materials (basic materials): After a rally of +4% in April and May, it has formed a box range with a slight negative range (-1~2%) since June.

What it means to you:

- These sectors currently lack strong 'growth stories' and are typical underperforming sectors.

- However, if variables such as rising commodity prices, expanded infrastructure investment, or energy supply shocks occur, they have the potential to surge at any time.

- From a long-term diversification perspective, it is reasonable to limit the weight to 5~10% and gradually accumulate while keeping the cyclical nature in mind.

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## 4. Today's Position Viewed Over a Week and Two Months

### 4-1. 7-day Flow: "A Day of Rotation" Today

Looking at the 7-day data, today is a day where 'baton touch' between sectors is clearly visible.

- Technology: After rising for 2 out of the last 3 trading days, it slightly adjusted -0.16% today

- Financials: After repeating small fluctuations for the past 4 trading days, it turned +2.61% today.

- Communication: After falling -0.84% on the previous trading day, it rebounded strongly +2.05% today

- Consumer Staples·Healthcare: Following a sharp drop (-1.85% etc.) on the previous day, it rebounded together today.

- Utilities·Energy: After falling slightly for several days, the decline widened today.

In summary:

- If last week was a growth and AI-centered rally,

- Today is a typical rotational market where "growth overheating adjustment + value and defensive stock revaluation" are happening simultaneously.

### 4-2. 60-day Trend: The Big Picture Still Shows "Growth Advantage, Rotation Speed Accelerating"

Summarizing the long-term sector portfolio signal:

- Technology: Starting from 100 in early April and reaching 130 on July 1st, it rose +30%. However, it has been taking a breather (-5%) since early June.

- Financials·Industrials·Healthcare·Real Estate: Maintaining an upward trend of around +10% between April and July.

- Consumer Staples: Showing small fluctuations but a steady +5% rise, playing the role of a "quiet winner" in defense.

- Communication·Utilities·Materials: Mixed results with some rebound (Communication) and further decline (Utilities) after 2~3 weeks of adjustment.

- Energy: A clear downtrend with a drop of more than -10% since April.

One-line summary:

- Although the index seems to have barely moved today,

- Looking deeper, "high-growth AI infrastructure → value, platform, and defensive sectors" are rapidly circulating.

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## 5. Today's Three Points & Checklist for Individual Investors

### Point 1. AI Semiconductor Adjustment is "Speed Control" Rather Than "End"

- Last quarter, AI semiconductors recorded the highest quarterly return rate in history, and today's -10% adjustment is highly likely to be a perfectly normal 'overheating cooling'. (axios.com)

- However, since the valuation has already risen significantly, there is a high possibility that future returns will follow a 'sharp rise followed by sideways' pattern.

Checklist:

- Check if the proportion of AI semiconductors in your entire portfolio does not exceed 30%.

- Confirm through reports whether future performance projections (sales and profit growth rate) for the next year are already reflected in the current stock price.

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### Point 2. Strength of Finance and Platforms is a "Masterpiece" of Interest Rates, Regulations, and Performance

- Finance is still benefiting from high interest rates and is gaining momentum based on the expectation that the economic slowdown will not be a sharp decline but rather a soft landing.

- Communication services (platforms, advertising, cloud) are being re-evaluated as business models that generate actual revenue after AI infrastructure investment.

Checklist:

- If there is no proportion of finance and communication services in your portfolio, consider reviewing whether to have at least minimal exposure through sector ETFs.

- When investing in individual stocks, check not only the number of users but also cash flow, margins, and regulatory risks.

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### Point 3. Defensive Stocks (Essential Consumer Goods and Healthcare) Prove Their Existence Once Again

- Today, with the simultaneous slowdown in manufacturing and AI overheating adjustment, the rise of food, daily necessities, and healthcare is no coincidence.

- Regardless of the economic situation, these sectors play a role as buffers that reduce portfolio volatility.

Checklist:

- If your stock proportion is high but essential consumer goods, healthcare, and utilities are almost non-existent, consider whether to add defensive assets in the range of 10-30% to mitigate volatility.

- Compare whether a broad ETF (e.g., S&P 500 sector ETF) is more advantageous for risk management than individual stocks in the defensive sector.

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## 6. Conclusion: "Between Overheating and Fear, Rotation Continues"

Today's market was outwardly a day of "calm index, turbulent inside".

- On one hand, there is an adjustment to cool down the overheating of AI semiconductors, a new growth narrative.

- On the other hand, 'performance and cash flow-centric' sectors such as finance, platforms, essential consumer goods, and healthcare are attracting attention.

What you should remember is:

1. You need to look at sectors, and even more importantly, business models, rather than just indices.

2. Today's movement is not "AI is over," but rather a "rotation" from a market that only looked at AI to looking at other sectors again.

3. Ultimately, what is important for individual investors is not accurately hitting the trending sector, but creating a portfolio structure that can withstand any economic or interest rate environment.

No one knows if tomorrow will continue in the same direction.

However, today we have once again confirmed a cross-section of a typical rotational market where new opportunities open up on one side when bubbles burst on the other side.

This content is written for informational purposes only and does not constitute investment advice for any specific security or asset.

Source: https://nextinvest.org/ko

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