Concentration Risk. For years, strategists have warned about the risks of a highly concentrated market. This week offered the reason why. Tech stocks aren’t working, and they’re taking the market down with them. The S&P 500 finished off 0.05% today, despite a majority of its components rising on the day. Healthcare stocks, for instance, jumped 3.2%. Consumer discretionary names were up 1.6%.

But heavyweight tech stocks had another subpar session amid renewed fears surrounding spending on artificial intelligence and its downstream impact on consumers. The S&P 500 info tech index was down 1.1% on the day. The tech-heavy Nasdaq Composite fell 0.2%, for its fifth-straight decline.

Recently red-hot chip stocks had a particularly tough day. The PHLX Semiconductor Index, better known as the SOX, finished down 5.3%.

The latest worry is that AI spending is driving up the cost of tech components. This week, companies signaled they’re done absorbing the costs. Apple and Microsoft led headlines about suddenly higher prices for laptops, smartphones, and other consumer devices. If those higher prices crimp sales, the whole tech supply chain could be hurt.

Meanwhile, the so-called Magnificent Seven of Nvidia, Apple, Alphabet, Microsoft, Amazon, Meta Platforms, and Tesla are looking particularly tarnished, notes my colleague Nate Wolf.

Nate notes that an ETF that tracks every S&P 500 stock BUT the Mag 7 is up 2.6% in June. (For those of you that appreciate a good stock symbol, the fund is tickered XMAG.)

So what happened to the vaunted Mag 7?

For one, their cash flows are slowing amid huge AI expenditures. From Nate’s story:

Watch our TV show on Fox Business Saturday and Sunday at 10:30 a.m. ET. This week, Brian Levitt, Invesco’s chief global market strategist, on the outlook for interest rates and inflation. Plus: Winners and losers from the World Cup.

The Hot Stock: Moderna +12.6%
The Biggest Loser: ON Semi -23.7%

Best Sector: Healthcare +3.2%
Worst Sector: Industrials -1.5%

Another holiday-shortened week will be light on company earnings but heavy on economic data, the most important of which is the jobs report, released on Thursday by the Bureau of Labor Statistics. Economists forecast a 113,000 increase in nonfarm payrolls after a 172,000 gain in May. The unemployment rate is expected to remain unchanged at 4.3%. Job growth has averaged 114,000 a month so far this year, compared with just 10,000 a month last year.

The BLS also releases the JOLTS report on Tuesday, while the Institute for Supply Management releases its Manufacturing Purchasing Managers’ Index on Wednesday.

Constellation Brands and Nike announce earnings on Tuesday, and General Mills reports on Wednesday.

—Dan Lam

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• Kevin Warsh Wants to Take the Fed Back to Greenspan’s 1990s. There’s One Big Problem.

• QQQ Isn’t the Only Game in Town. Competition Heats Up for Nasdaq-100 ETFs.

• And this weekend’s cover story: Drones Are Upending Warfare. What Investors Need to Know.

Will the Roaring ‘20s Keep Roaring? An Update from Dr. Ed Yardeni

Join Barron’s Live on Monday at noon. Yardeni, president of Yardeni Research, will speak with Barron’s Ben Levisohn and Lauren Rublin about his economic and market outlook, the sectors he favors, and his early read on Kevin Warsh’s leadership of the Fed.

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