Equities Rotation Slaps Tech Giants as Small Caps Rise – US Market Wrap

A tech selloff drove equities down from near-record highs, as investors shifted into more economically sensitive industries. A surge in geopolitical concerns boosted oil prices, while gold recovered from a historic low. Bitcoin’s drop briefly exceeded 7%.

A drop in software companies dragged on trading as Anthropic’s automation tool raised concerns that their core businesses were at risk. Despite Palantir’s positive forecast, the S&P 500 dropped 0.8% and the Nasdaq 100 plummeted 1.6%. Energy stocks rose alongside crude after the US Navy knocked down an Iranian drone aimed at an aircraft ship in the Arabian Sea.

Despite the sharp declines in major benchmarks, the majority of S&P 500 shares climbed. FedEx, an economic bellwether, extended its record-breaking rise. Walmart has surpassed $1 trillion.

Bets on AI companies have dominated the US equities market for three years, but an increasing number of investors believe the run, led by the “MAG7” megacaps, is giving way to greater market participation. In reality, a dramatic shift occurred in 2026, with value shares outperforming growth.

In another evidence of rotation, an equal-weighted version of the S&P 500, which gives Dollar Tree the same clout as Apple, edged only slightly lower. The Russell 2000 index of small businesses rose 0.3%. At the same time, the group of software shares in the US market benchmark fell by roughly 4%.

The dollar fell after posting its largest back-to-back gains since April. Treasuries barely moved, as investors digested the latest comments from central bank speakers.

According to the Fed’s Barkin, policy easing has boosted the labour market, and authorities are now aiming to return inflation to the objective. According to Fed’s Miran, the lack of robust price pressures necessitates another rate cut this year.