Chip Stock Selloff and Dollar Strength Reshape EM Landscape as Brent Crude Returns to Pre-Conflict Lows

Weekly Market Commentary | Week of Jun 29th, 2026

A Recap of Economic and Financial Trends from the Prior Week

By: Michael Horvath, The Quinnipiac University Global Economics Research Team

Last Week in Review

• Core PCE rose to its highest level since October 2023 while Q1 GDP was revised up to 2.1%, though a sharp chip stock selloff drove the Nasdaq's steepest weekly decline since March as valuations came under pressure

• The Dow Jones Industrial Average and Russell 2000 advanced while the S&P 500 and Nasdaq fell sharply, with large-cap value outpacing growth by 368 basis points as Brent crude fell to pre-conflict lows near USD 72

• The U.S. dollar index reached a one-year high on rising rate hike expectations, UK Prime Minister Starmer resigned, and South Korea's KOSPI tumbled as leveraged AI-related equity products amplified selling pressure

Economic Recap

U.S. economic data last week delivered a resilient growth picture alongside continued inflationary pressure. The BEA reported that the PCE price index rose 0.4% in May, with the annual rate accelerating to 4.1%, the highest since April 2023. Core PCE rose 0.3% month over month and 3.4% year over year, the highest since October 2023. Personal income and consumption both increased 0.7% in May, ahead of consensus estimates. Separately, the BEA revised Q1 GDP growth up to an annualized 2.1% from its prior estimate of 1.6%. The S&P Global Flash Composite PMI rose to 52.2 in June, its highest level in five months, with manufacturing at 55.7, its strongest reading since May 2022, though employment softened for a second consecutive month and input price inflation remained historically elevated.

Internationally, the ECB's latest survey showed eurozone consumer inflation expectations for the next 12 months declined to 3.5% in May, while oil prices trading back toward pre-conflict levels could reduce pressure for further ECB rate hikes. The eurozone Flash Composite PMI rose to 49.5 in June, while Germany's composite PMI declined to 48.0, its third consecutive monthly decline. In Japan, the Tokyo-area core CPI rose 1.6% year over year in June, its first pickup in eight months, reinforcing expectations that the Bank of Japan will continue raising rates. Prime Minister Takaichi announced a fiscal expansion of approximately JPY 370 trillion through 2040, targeting AI, semiconductors, and other strategic sectors. In China, the PBOC left the one-year and five-year loan prime rates unchanged at 3.00% and 3.50% respectively, while beginning implementation of a new short-term liquidity management framework.

Market Recap

Source: JPMorgan Asset Management, “Weekly Market Recap” (June 29^th, 2026). (Chart © JPMorgan Asset Management. Chart used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

U.S. equity markets finished the week mixed as a sharp selloff in chip and memory stocks weighed heavily on the Nasdaq and large-cap growth indexes while value stocks and smaller caps held up. The Nasdaq Composite fell 4.59% to 25,298 and is up 9.18% year to date, while the S&P 500 declined 1.94% to 7,354 and is up 8.06% year to date. The Dow Jones Industrial Average gained 0.60% to 51,876 and is up 8.82% year to date, while the Russell 2000 rose 1.03% and is up 21.94% year to date. The Russell 1000 Value gained 0.28% and is up 16.38% year to date, outpacing the Russell 1000 Growth, which fell 3.39% and is now up only 0.95% year to date. The 10-year Treasury yield fell to 4.37% as oil prices hit pre-conflict lows, with Brent crude declining to USD 72 as Strait of Hormuz flows picked up.

Internationally, the MSCI EAFE fell 1.29% and MSCI EM declined 4.44% on the week, though both retain meaningful year-to-date gains of 8.69% and 22.78% respectively. The pan-European STOXX Europe 600 was essentially flat at 0.04% in local currency terms, with the UK's FTSE 100 gaining 1.40% while Germany's DAX fell 1.26%, France's CAC 40 declined 0.43%, and Italy's FTSE MIB dropped 3.00%. South Korea's KOSPI tumbled 7.08% as leveraged single-stock exchange-traded funds tied to Samsung Electronics and SK Hynix amplified index-level selling pressure.

Market Themes

Dollar Strength Shifts the Case for Emerging Markets Toward Selectivity

BlackRock Investment Institute argues that a stronger U.S. dollar no longer automatically translates into broad emerging market weakness, fundamentally shifting how investors should approach EM allocation. The U.S. dollar index reached a one-year high following the Federal Reserve's hawkish first meeting under Chair Warsh, with two factors driving the rebound: widening interest rate differentials in the dollar's favor and stable perceived risk around U.S. assets. After falling sharply following the announcement of reciprocal tariffs in April 2025, the dollar has recovered more than half of that decline. BlackRock views current dollar levels as broadly in line with underlying fundamentals, making a sustained appreciation cycle less likely. The key implication is that EM performance increasingly depends on local fundamentals and structural themes rather than the direction of the dollar alone, with consensus now expecting headline earnings per share for the MSCI Emerging Markets Index to grow more than 50% in 2026 versus 2025. BlackRock favors Latin America for AI-fueled demand for copper and lithium, and maintains its overweight to EM hard-currency debt given its skew toward commodity exporters and attractive income potential.

Chip Stock Retreat Tests the AI Earnings Thesis Without Breaking It

BlackRock Investment Institute views the 8% weekly decline in the Philadelphia Semiconductor Index as a valuation-driven correction rather than a signal that AI revenue momentum is faltering. AI-linked companies that have lifted guidance on revenue and profit margins show the buildout is rolling on. The correction follows a year in which the Philadelphia Semiconductor Index had gained nearly 90%, making some degree of profit-taking and valuation reassessment inevitable, particularly as investors assessed the pace of capital deployment against near-term earnings visibility. South Korea's KOSPI fall of 7.08% illustrated how leveraged retail participation and margin debt can amplify volatility in AI-linked markets, with regulators reportedly considering stabilization measures including potential limits on leveraged products. BlackRock stays overweight U.S. and EM equities and continues to favor infrastructure and equipment supporting the AI buildout, viewing semiconductors, power infrastructure, and data centers as positioned to benefit regardless of which specific AI applications ultimately prevail.

Chart of the Week

Source: BlackRock Investment Institute, with data from LSEG Datastream, "Dollar's Rate Boost: U.S. Dollar Index vs. Trade-Weighted Two-Year Yield Differentials, 2023-2026," June 2026. Notes: The orange line shows the U.S. Dollar Index (DXY). The yellow line shows the trade-weighted average U.S. two-year yield differential versus Germany, Japan, the UK, Canada, Sweden and Switzerland, using DXY currency weights. Yield differentials are shown in percentage points. (Chart © BlackRock Investment Institute. Used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

The chart plots the U.S. Dollar Index against trade-weighted two-year yield differentials from 2022 through June 2026. The two series have historically tracked closely, with the dollar broadly following the direction of U.S. rate differentials over major peers. Following the announcement of reciprocal tariffs in early 2025, both the DXY and yield differentials fell sharply before recovering materially as markets repriced the Federal Reserve's policy path toward a higher-for-longer and potentially higher trajectory. As of June 2026, the DXY has recovered to approximately 101, near a one-year high, while yield differentials have also rebounded to approximately 1.5 percentage points. BlackRock uses this chart to illustrate that the dollar's current strength is fundamentally rate-driven rather than reflecting a new safe-haven premium, supporting its view that current dollar levels are broadly in line with fundamentals and that a sustained appreciation cycle is less likely from here.

Market Outlook

The June payrolls report, due Thursday, is this week's primary market catalyst in a holiday-shortened week ahead of the July 4 Independence Day closure. Following the hawkish market reaction to the Federal Reserve's June meeting, investors will scrutinize the report for evidence of whether labor market conditions could still support a rate hike later this year. BlackRock will also watch U.S. job openings, euro area flash inflation, and China's manufacturing PMI for further signals on whether global economic momentum is holding up as energy prices ease back toward pre-conflict levels. With Brent crude near USD 72, the relief to energy-importing economies is meaningful, though BlackRock continues to monitor Hormuz shipping traffic for any signs of renewed disruption that could reverse recent oil price declines.

Calendar Events

Economic Data:

Jun. 30 (Mon): U.S. Job Openings (May); UK GDP (May); China Manufacturing PMI (Jun)Jul. 1 (Tue): Euro area flash inflation (Jun)Jul. 2 (Wed): U.S. Payrolls (Jun); EU Unemployment (May)Jul. 3 (Thu): UK Services PMI (Jun)Jul. 4 (Fri): U.S. markets closed for Independence Day

Major Corporate Earnings:

Jun. 30 (Tue): Nike Inc. (Q4 2026); Constellation Brands Inc. (Q1 2027)

Sources

J.P. Morgan Asset Management. "Weekly Market Recap PDF." J.P. Morgan Asset Management. https://am.jpmorgan.com/content/dam/jpm-am-aem/americas/us/en/insights/market-insights/wmr/weekly_market_recap.pdf

J.P. Morgan Asset Management. "Economic Update." J.P. Morgan Asset Management. https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/economic-update/

T. Rowe Price. "Global Markets Weekly Update." T. Rowe Price Insights. https://www.troweprice.com/personal-investing/resources/insights/global-markets-weekly-update.html

BlackRock Investment Institute. "Weekly Investment Commentary: Dollar Strength Shifts Case for EM." BlackRock, June 29, 2026. https://www.blackrock.com/us/individual/literature/market-commentary/weekly-investment-commentary-en-us-20260629-dollar-strength-shifts-case-for-em.pdf

BlackRock Investment Institute. "Weekly Commentary Archives." BlackRock. https://www.blackrock.com/corporate/insights/blackrock-investment-institute/archives

Apollo. "The Daily Spark." Apollo. https://www.apollo.com/wealth/the-daily-spark

MarketWatch. "Economic Calendar." MarketWatch. https://www.marketwatch.com/economy-politics/calendar

Yahoo Finance. "Earnings Calendar." Yahoo Finance. https://finance.yahoo.com/calendar/earnings/