The market experienced a volatile week defined by sharp rotations underscoring a growing bifurcation between growth and value. The DJIA (+2.5%) surged to fresh record highs, supported by strength in cyclical and defensive areas, while the S&P 500 (-0.1%) and Nasdaq Composite (-1.8%) finished lower as sustained pressure weighed on mega-cap and growth-oriented stocks. Small- and mid-cap stocks outperformed, with the Russell 2000 (+2.2%) and S&P Mid Cap 400 (+4.4%) posting solid weekly gains.
The technology sector (-1.4%) struggled mightily as software stocks came under sustained pressure. Microsoft’s post-earnings report decline weighed heavily on the group and exacerbated concerns that AI adoption may disrupt traditional software business models. The iShares Expanded Tech-Software ETF fell sharply (-8.7%), making it one of the weakest areas of the market. Alphabet and Amazon moved lower following the release of massive multi-year capital expenditure plans, reigniting concerns about return on investment and pressuring the communication services (-4.4%) and consumer discretionary (-4.6%) sectors. Mega-cap weakness was further reflected in the Vanguard Mega Cap Growth ETF (-3.1%).
In contrast, value-oriented and defensive sectors benefited from persistent rotational flows. The consumer staples sector (+6.0%) led the market as investors favored earnings visibility and pricing power, while the industrials (+4.7%), energy (+4.3%), and materials (+3.5%) sectors all posted strong gains. The financials (+1.5%) and health care (+1.9% sectors) also outperformed, reinforcing the market’s preference for non-growth exposures amid heightened volatility in technology.