Hello, I'm Eric Criscuolo, Market Strategist at the New York Stock Exchange, and this is Market Storylines. Every week we’re here to keep you up to date on the key trends and events driving global markets. We’re recording this on Thursday June 25th . The city is only just starting to come off its high from the Knicks championship and the ensuing parade up the Canyon of Heroes, which took the Champs right past the front door of the NYSE.

Last week Michael dropped a lot of Knickerbocker references, as he should have. But he also managed to fit into his commentary a detailed review of Kevin Warsh’s first policy meeting and rate decision as Fed chair. His commentary included equities selling off and Treasury yields rising on hawkish takeaways from the meeting. With markets closed on Friday for Juneteenth, the S&P ended up 1%. Tech hardware and semiconductors had a lot to do with that. The ICE Semiconductor ETF rose 7% last Thursday. The DRAM memory ETF rose 10%, and 18% for the week. The Tech and Industrials sectors were the best performers, while Energy was the worst due to crude falling about 10% for the week.

This week started with Summer making its triumphant return to the Northern Hemisphere as the Solstice occurred early Sunday morning. That means Michael and I need to pivot from the Knicks to the Yankees.

Speaking of pivots, Kevin Wash has begun the process of pivoting the Fed to new strategies and operations, and finding a new identity, so to speak. The same can be said of markets this week, and in particular, the Tech and AI trade. In a nutshell, the market is trying to figure out what this trade wants to become. A rift has been forming between AI hardware suppliers versus buyers and model providers. At its most basic- hyperscalers spending billions on capex and chips from semiconductor and memory suppliers. This week saw Hyperscalers- Alphabet, Microsoft, Amazon and Meta down 5-7%. Oracle was under the most pressure down over 15%. The concern around the AI infrastructure suppliers manifested in smaller operators like the neoclouds and HPC providers that have converted from crypto miners. Declines of 10-20% were common across that group, including CoreWeave down 15%.

It would be nice if it was a clean spilt and concise narrative, but it’s not. Chip suppliers were on a roller coaster. The DRAM memory ETF rose over 15% from Thursday of last week to Monday. It then gave it all back when it fell 14% on Tuesday. Then, memory bellwether Micron reported absolute blowout earnings Wednesday night. The overall takeaway was that memory supply was severely constrained and would remain so into next year due to AI demand. The DRAM ETF ripped 10% on Thursday, including a 20% gain for Micron. South Korean memory giant SK Hynix followed a similar pattern. However, other AI component suppliers didn’t fare as well. Nvidia is down about 8% this week. Meanwhile, software’s impressive comeback from April to the start of June is close to fully evaporating as the IGV ETF continues to fall back towards mid-April lows.

While tech generates all the headlines right now, there’s more to the market than trillion parameter AI model training. I myself am guilty of talking too much about it. While the weakness in tech is responsible for the S&P 500’s 2% decline this week, as of now, underlying metrics are much better. 8 of 11 sectors are higher this week. The S&P equal-weight index is up 1%, outperforming the headline index by 300 basis points. Small cap indexes are up 1-2%. Pulling back a bit more on that, the Russell 2000 is up 20% this year. Know what the S&P 500 is up? 7%.

Some of the moves this week had to do with basic rotation out of the long-term Tech trade and into other areas, like Healthcare. It’s the leading sector this week despite coming into it down around 5% on the year. Financials are also a leading sector as well as a YTD underperformer. The approaching quarter-end next week is likely driving some of that rotation. Behind that though, are an increasing number of stories of companies pulling back on their AI spending as budget items like token spending get completely blown out. Expanding on that are the exploding costs of production. Apple provided the latest example today, announcing big price increases across most of its product lineup due to skyrocketing prices for memory and storage chips. Micron’s quarterly gross margin chart provides a stark example of the economics of AI. As the old economic adage goes - the cure for high prices, is high prices.

Another big reason for the performances this week is the rapid decline in oil and the peace progress with Iran. Crude is down about 5% this week, and about 20% from the high on June 3. That’s helped areas like travel and leisure and airlines. Related to oil’s decline is the drop in yields. Michael noted last week that yields shot higher on bullish takeaways from Kevin Warsh’s first meeting as Fed chair. They crept even higher despite the drop in oil. This week, however, it appears that oil’s slide may finally be pushing yields lower. The 2yr is down almost 10bp this week and odds of a rate hike at the next FOMC meeting in July have been dialed back.

Metals have seen even larger moves to the downside. Gold has fallen 5% this week and is back around $4000, a level not seen since last Fall. Silver is down over 10%. Gold and silver are correcting from record highs earlier this year. They are hitting oversold levels while rates and oil move lower and a re-evaluation of the quick-trigger Fed takeaways are now happening. We could see some support materialize for precious metals, especially if central banks continue to buy. Moving to crypto, Bitcoin was trying to bounce last week after a month of sustained pressure. That move fizzled out however, and Bitcoin is now struggling to hold $60K. The sharp fall in MicroStrategy’s Stretch preferred shares, from its unofficial peg of $100, to $75 currently is acting in a self-perpetuating cycle with the digital coin itself.

Looking ahead, the Russell reconstitution will occur Friday after the close. Expect big volumes. That leads into another holiday shortened week next week, which will also see the end of Q2 and and the first half of 2026. Markets will be closed on Friday July 3 in observance of July 4th. The monthly payroll numbers will headline the economic data. ISM Manufacturing PMI, Housing Prices, JOLTS job openings, Challenger job cuts, and Factory Orders will also be on the calendar. Earnings will include Nike, Constellation Brands, FactSet and General Mills.

That’s a wrap for this week. You can watch Market Storylines on TV.NYSE.com or on the NYSE YouTube Channel. You can also listen on the Inside the ICE House Podcast feed. Thanks for joining me. I’m Eric Criscuolo. We’ll see ya next week. Enjoy your summer!