Tech Cracks Under Pressure: Defensives and the Dow Hold the Line

For the week of Jun 26, Global equity markets retreated into a risk-off posture for the week ending 27 June, as a sharp sell-off in technology shares reverberated across U.S. and Asian markets against a backdrop of elevated inflation, hawkish Fed signals, and mounting concern over stretched AI valuations. In the United States, the Nasdaq Composite and S&P 500 fell meaningfully as large-cap technology stocks led the decline, while the Dow Jones held up in positive territory on defensive rotation into health care, utilities, and real estate. Chinese and Hong Kong markets suffered their worst weekly performance in recent months, with the Hang Seng Index plunging on broad-based selling that was most severe in internet platforms, consumer names, and solar stocks. Singapore's Straits Times Index was effectively flat for the week, as gains in aviation, transport, and S-REIT names were offset by weakness in offshore marine, property developers, and industrials.

🇺🇸 United States

Market Overview

U.S. equities posted a divergent week, with the Dow Jones Industrial Average (DJI) eking out a gain of +0.60% even as the S&P 500 (SPX) fell -1.95% and the Nasdaq Composite (COMP) dropped -4.60%, marking one of the tech-heavy index's sharpest weekly declines of the year. The selldown in large-cap technology and AI-related names drove the underperformance, with sector ETF data pointing to Technology (XLK) as the week's worst performer, while defensives including Health Care (XLV) and Utilities (XLU) led the way higher — a clear rotation into safety amid rising rate and valuation concerns. PCE inflation data for May, released during the week, confirmed headline inflation at 4.1% year-over-year — the highest since April 2023 — keeping the Fed's hawkish posture intact and reinforcing the pressure on growth-oriented equity valuations.

(Refer to the major indices' weekly performance tables below.) 

Major Indices – Weekly Performance

·       Dow Jones Industrial Average (DJI): +0.6%

·       S&P 500 (SPX): -1.95%

·       Nasdaq Composite (COMP): -4.6%

 

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Key Highlights and Outlook

1️⃣ Technology Leads Market Lower; AI Valuations Under Scrutiny

Technology (XLK) fell -5.40% for the week, the worst-performing S&P 500 sector by a significant margin, as concerns over stretched AI valuations and slowing growth in mega-cap names triggered broad selling. Magnificent 7 constituents bore the brunt of the decline, and SpaceX shares are now down approximately 25% from their post-IPO peak. The move reflects a growing market consensus that the AI-driven rally from March to May has reached a point of valuation exhaustion.

2️⃣ Defensive Rotation Accelerates into Health Care and Utilities

Health Care (XLV) surged +7.32%, the week's clear sector leader, as investors rotated aggressively into defensives amid the tech selloff and inflation uncertainty. Utilities (XLU) +3.22% and Real Estate (XLRE) +3.15% also posted solid gains, a notable reversal from recent weeks when rate sensitivity had weighed on these sectors. Consumer Staples (XLP) +1.69% rounded out the defensive outperformers, confirming the defensive character of the week's market movement.

3️⃣ PCE Inflation at Multi-Year High; Fed Stays Hawkish

The Bureau of Economic Analysis confirmed May PCE inflation at 4.1% year-over-year — the highest reading since April 2023 — while core PCE held at 3.4%, also a multi-year high. Personal income and consumer spending both rose 0.7% in May, ahead of estimates, signalling continued household resilience. The data kept the Fed's hawkish posture firmly intact, with half the FOMC having pencilled in further rate hikes at their June meeting; falling oil prices provide some offset but are unlikely to shift the committee's near-term stance.

4️⃣ GDP Revised Up; Business Activity Improves

First-quarter real GDP growth was revised up to 2.1% annualised from 1.6%, driven by a downward revision to imports. The S&P Global Flash Composite PMI rose to 52.2 in June — a five-month high — with manufacturing PMI reaching 55.7, its strongest since May 2022. Q2 GDP is tracking at approximately 2.5%, underpinned by robust household and business spending, though employment softened for the second consecutive month as firms focused on cost control amid elevated input prices.

5️⃣ Treasury Yields Slip as Oil Falls; Dollar Hits 2026 High

U.S. Treasuries rallied as the 10-year yield dipped below 4.40% for the first time in over a month, aided by falling oil prices and roughly in-line PCE data. Investment-grade corporate bonds gained alongside Treasuries, though high yield faced pressure from monetary policy uncertainty, heavy new issuance, and risk-off positioning. Meanwhile, the U.S. dollar hit a new 2026 high on the back of the Fed's hawkish June pivot, weighing on commodity prices and international equity returns for U.S.-dollar investors.

6️⃣ Oil Collapse Adds Disinflation Tailwind Heading Into H2

WTI crude fell below $70 per barrel — down nearly $25 from a month ago and over $40 from its 2026 peak — as the U.S.–Iran interim peace agreement held and tanker traffic through the Strait of Hormuz continued to recover. Energy prices, which added 1.5 percentage points to May headline CPI, are expected to contribute materially less through the summer months. Lower energy costs should support household real incomes and consumer spending, providing an economic tailwind even as the Fed remains cautious on the rate path.

 

S&P 500 Sectors in Focus

Health Care (XLV) was the week's standout sector, rising +7.32% in a broad rotation into defensives as technology valuations faced scrutiny, while Utilities (XLU) +3.22% and Real Estate (XLRE) +3.15% also outperformed meaningfully. At the other end of the spectrum, Technology (XLK) fell -5.40% as AI and mega-cap growth names came under heavy selling pressure, with Communication Services (XLC) -2.99% also declining on weakness in internet-related names.

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Technical Snapshot

The S&P 500 (SPX) closed at 7,354.02, down -1.95% for the week and now at +7.43% year-to-date, with the index pulling back from recent highs as technology sector weakness eroded the broader market's gains.

📊 Weekly charts:

• DJI weekly chart
• SPX weekly chart
• Nasdaq weekly chart

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🇨🇳 China / Hong Kong

Market Overview

Chinese and Hong Kong equities suffered a sharply negative week, as the global technology sell-off combined with domestic demand concerns and sector-specific pressures drove broad-based declines. The Shanghai Composite (SSE) declined -1.55% to close at 4,027.26, while the Hang Seng Index (HSI) fell -5.24% to 22,671.86 — one of its worst weekly performances in recent months — with the index now down -11.54% year-to-date. Internet platforms, solar names, and consumer discretionary stocks led the HSI lower, with the index's heavy weighting in these sectors amplifying the global technology risk-off move; the divergence from mainland benchmarks continued to reflect the HSI's concentrated exposure to names facing both domestic demand headwinds and global growth repricing.

Index Weekly Performance

·       CSI 300: -1.48%

·       Shanghai Composite Index (SSE): -1.55%

·       Hang Seng Index(HSI): -5.24%

 

Key Highlights and outlook

1️⃣ Hang Seng Plunges; Internet and Solar Names Hardest Hit

The HSI's -5.24% decline was driven by broad-based selling across its largest constituents, with internet platforms suffering particularly severe losses: Alibaba fell -14.68%, Sunny Optical plunged -24.02%, Tencent declined -6.45%, and JD.com dropped -11.85%. Solar names were also deeply negative, with Xinyi Solar -14.89% and Zijin Mining -14.40%. The scale of declines across the index reflects a confluence of global risk-off sentiment, domestic demand disappointment, and sector-specific valuation resets.

2️⃣ PBOC Holds LPRs; New Liquidity Framework Under Watch

The People's Bank of China left the one-year and five-year Loan Prime Rates (LPRs) unchanged at 3.00% and 3.50% respectively — steady for 13 consecutive months — reinforcing its deliberate, targeted approach to easing. Separately, the PBOC announced plans to launch overnight reverse repo operations under a new liquidity management framework, following Governor Pan Gongsheng's Lujiazui Forum remarks. Market participants will closely watch the inaugural operation's rate and take-up for signals on the evolution of monetary policy transmission.

3️⃣ Exports Strong but Domestic Demand Remains the Weak Link

May exports rose 19.4% year-on-year — well ahead of expectations — providing a key cushion to growth, but the domestic demand picture remains challenging. Retail sales fell 0.6% YoY in May after barely positive readings in prior months, while property investment declined 16.2% YoY. Combined with fiscal underspending and sluggish fixed-asset investment momentum, the data reinforces the case for more targeted policy support in the second half of 2026, with the July Politburo meeting a key catalyst to watch.

4️⃣ Politburo Meeting in Focus; Policy Pivot Seen as Incremental

The upcoming July Politburo meeting remains the key near-term catalyst, with the market watching for more supportive rhetoric on consumption, project acceleration, and property stabilisation. Sell-side conviction names — AIA, Alibaba, COLI, and Tencent — retain their positioning as key beneficiaries of any such policy shift, given their leverage to household confidence recovery and broader risk sentiment. However, consensus expectation is for measures to remain targeted and incremental, as resilient export performance reduces urgency for a broad-based stimulus pivot.

 

Technical Snapshot

The Hang Seng Index closed at 22,671.86, down -5.24% for the week and now -11.54% year-to-date, breaking below recent support levels in a move accompanied by broad constituent selling that left few defensive havens within the index.

(Refer to the Hang Seng Index constituents’ weekly performance table below.)

📊 Weekly charts:

• SSE weekly chart
• HSI weekly chart

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🇸🇬 Singapore

Market Overview

The Straits Times Index (STI) closed the week essentially unchanged at 5,191.73, down just -0.02%, preserving the bulk of the prior week's strong +3.32% advance and holding its year-to-date gain at +11.74%. The near-flat close masked significant dispersion beneath the surface, with aviation names — led by SIA (C6L) +5.08% — and defensive S-REIT and staple names posting solid gains, while offshore marine names, property developers, and select industrials gave back ground. Singapore's relative resilience against sharply negative regional peers underscored the market's defensive characteristics and its reduced direct exposure to the technology and internet sectors that drove losses in the U.S. and Hong Kong.

Index Weekly Performance

·       Straits Times Index (STI): -0.02%

 

Key Highlights and Outlook

1️⃣ SIA Leads Gains as Aviation Demand Outlook Holds

Singapore Airlines (C6L) rose +5.08% to close at 7.65, now up +19.53% year-to-date, as continued recovery in air travel demand and the positive margin impact of lower jet fuel costs from falling oil prices drove renewed buying interest. SATS (S58) added +2.75%, extending its run to +17.85% year-to-date, as improving passenger volumes supported the ground handler's recovery trajectory. Aviation-related names provided the week's clearest positive contribution to the STI.

2️⃣ S-REITs Recover as Rate Outlook Stabilises

Several S-REIT names posted positive returns for the week, with Mapletree Pan Asia Commercial Trust (N2IU) +2.36%, Frasers Centrepoint Trust (J69U) +2.23%, and CapLand IntCom Trust (C38U) +2.13% all advancing, while CapitaLand Ascendas REIT (A17U) gained +1.20%. The recovery in rate-sensitive names reflects the modest easing in U.S. Treasury yields during the week, with investors reassessing distribution growth prospects as the inflation and rate outlook stabilised marginally.

3️⃣ Banks Modestly Mixed; DBS Slips on Profit-Taking

Singapore's three banks posted a mixed week, with UOB (U11) gaining +1.40% and OCBC (O39) edging up +0.93%, while DBS (D05) dipped -0.80% — likely reflecting some profit-taking after the prior week's strong advance. All three banks remain comfortably positive on a year-to-date basis, with DBS +16.09% and OCBC +25.81%, supported by healthy NIM levels, robust dividend yields, and solid NPL management. NIM trajectory into year-end remains the key watch variable for the sector.

 

(Refer to the STI weekly performance table below.)

📊 Weekly chart:

• STI weekly chart

 

Source: Some content and data are excerpted from publicly available market reports.