S&P 500 equal-weight index rises 1.1% to record as rotation broadens

The S&P 500 Equal Weight Index climbed 1.1% to an all-time high, the strongest breadth signal of the bull market.

The S&P 500 Equal Weight Index rose 1.1% to a record intraday high as investors rotated out of chipmakers into a broader set of stocks on improving growth prospects.

"There is good reason for the strength in risk assets," said Max Kettner, chief multi-asset strategist at HSBC Holdings Plc, citing a solid start to second-quarter earnings, a rebound in US economic forecasts and lower equity valuations.

The equal-weighted gauge reached record levels even as the market-cap-weighted S&P 500 fell 0.1 percent. The Dow Jones Industrial Average gained 0.6 percent, while the Nasdaq 100 slid 1.1 percent as semiconductor stocks extended their selloff toward the worst monthly performance since 2002. The Fear & Greed Index remained in "greed" territory. Treasury yields declined, with the 10-year note falling two basis points to 4.62 percent, as a drop in oil prices eased inflation concerns. West Texas Intermediate crude fell 2.2 percent to $80.82 a barrel, while spot gold declined 1.1 percent to $4,030.49 an ounce. The Bloomberg Dollar Spot Index was little changed.

The rotation raises a critical question: whether the hundreds of billions of dollars flowing into artificial intelligence can justify chipmaker valuations. That tension sets up a pivotal week, with earnings due from Microsoft Corp. and Meta Platforms Inc. on Wednesday, followed by Apple Inc. and Amazon.com Inc. on Thursday. The Federal Reserve's rate decision also looms, with traders watching for any signal on the timing of policy easing.

The shift into broader market participation marks a departure from the narrow leadership that has defined much of 2026, when a handful of megacap tech stocks drove the bulk of index gains. More than half of S&P 500 members rose during the session, a breadth reading that strategists said supports the case for a more durable rally. Financials and industrials were among the top-performing sectors, while technology and communication services lagged as investors pared exposure to high-valuation growth names.

Strong profit growth and undemanding valuations are keeping risk assets resilient to a more challenging inflation backdrop, the HSBC team wrote. Second-quarter earnings have beaten estimates at a rate above the historical average, with companies across sectors from consumer staples to industrials reporting solid results. Coca-Cola Co. raised its full-year outlook after strong demand during its FIFA World Cup sponsorship. United Parcel Service Inc. boosted its sales guidance for the year. Boeing Co. generated better-than-expected cash flow in the second quarter. PayPal Holdings Inc. reported earnings that beat analysts' estimates as its reorganization strategy gained traction.

The selloff in chipmakers has been sharp. The Philadelphia Stock Exchange Semiconductor Index has fallen more than 15 percent from its peak as concerns grow over whether the pace of AI-related spending can be sustained. Nvidia Corp. shares tumbled 5 percent in a single session, dragging the broader tech sector lower. The rotation into value and cyclical names suggests investors are betting the economic expansion can broaden beyond the AI trade, a shift that could define market direction in the months ahead.

This article is for informational purposes only and does not constitute investment advice.