Wild Swings Engulf Global Equities

U.S. stock markets experienced significant volatility. An early-week rally pushed the markets to new highs, but this momentum faded, primarily due to weaknesses in the tech sector. The major indices had a mixed finish with, S&P 500 and Nasdaq closed lower, while the Dow recorded a notable gain.

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I'n the past fortnight saw a shift in market leadership toward small-cap and value stocks. The Dow Jones Industrial Average, a more narrowly focused index, outperformed, and value stocks outpaced growth stocks by 477 basis points (4.77 percentage points). This divergence marked the largest since March 2023, when growth stocks outperformed by 654 basis points.

A key factor behind the underperformance of growth stocks was a significant decline in chip company stocks. This followed news that the Biden administration was considering stringent export curbs if companies like Tokyo Electron and the Netherlands' ASML Holding continued providing China with advanced semiconductor technology. Major chipmakers, including Taiwan Semiconductor Manufacturing, Broadcom, and NVIDIA, saw substantial declines.