The major domestic equity indexes ended mixed as a rotation in market leadership to small-cap and value shares continued and market breadth improved. The narrowly focused Dow Jones Industrial Average outperformed, and value stocks outpaced growth stocks by 477 basis points (4.77 percentage points), as measured by Russell indexes – the largest divergence since March 2023. Also notable this month was a widespread global disruption to computer systems due to an error in CrowdStrike’s security update to some users of the Microsoft operating system.

A major factor in the underperformance of growth stocks was a sharp decline in chip following news that the Biden administration had told allies it was considering severe export curbs if companies such as Tokyo Electron and the Netherlands’ ASML Holding continued providing China with access to advanced semiconductor technology.

Polls showing an increasing likelihood of a Republican sweep in the November elections also appeared to favor value stocks. The prospect of lighter banking regulation seemed to provide a boost to the value-oriented financials sector, for example, while the prospect of higher tariffs under a Trump administration may have favored industrials and business services shares.

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