US equities entered the new week digesting a sharp rotation out of artificial intelligence-linked names and into defensive sectors. The S&P 500 healthcare sector gained more than 7% last week, marking its biggest weekly advance since June 2022 and making it the strongest performer among the index’s 11 sectors. By comparison, the broader S&P 500 fell roughly 1.8%.
Bio-Techne and Incyte led the healthcare rally, with gains of more than 22% and 15%, respectively, while the Health Care Select Sector SPDR Fund, XLV, advanced 7.12%. Consumer staples and utilities also held up well as investors rotated out of crowded chip and AI infrastructure trades.
Six of the 11 S&P 500 sectors gained last Friday, led by healthcare, real estate, and consumer staples, while technology and industrials lagged. The selling pressure was concentrated in semiconductors and AI hardware names, with Nvidia falling nearly 9% for the week, its weakest weekly performance in more than a year.
The rotation affected major US benchmarks unevenly due to differences in sector exposure. Last week, the S&P 500 Equal Weight Index, the Dow Jones Industrial Average, and the small-cap Russell 2000 all gained, even as the cap-weighted S&P 500 and the Nasdaq declined.
The divergence reflected selling pressure in technology, combined with capital moving into non-technology areas of the market. The Russell 2000 and the equal weight S&P 500, both less exposed to mega cap AI names than cap weighted indices, were relatively insulated from the chip sell off and benefited from the reallocation.
Among blue chip stocks, the clearest winners were established healthcare names. Eli Lilly jumped nearly 6%, Johnson & Johnson climbed more than 3%, and AbbVie added over 2% in a single session. Brokers noted that buying across the sector was broad-based rather than concentrated in a single stock.
Strategists caution that the move appears to be more of a profit taking phase and catch up trade for previously neglected sectors than a definitive end to the AI cycle. Several analysts also noted that it remains premature to assume AI infrastructure names will lag over the next 12 months. For now, however, defensive sectors and small caps are attracting the bid that mega cap technology stocks have dominated for much of the past two years.
Technical Analysis
Johnson & Johnson is the 18th largest company by market capitalization in the S&P 500, accounting for approximately 1% of the index’s weight. It is also the 15th largest component of the DJ30, where it represents more than 3% of the index.
Yesterday, the stock closed at $258.51, up 1.51%. Over the past five sessions, J&J has gained $13.63 after rallying from around $227.50.
The trend has been clear and well-defined since May 2025 and remains contained within a price channel. The lower boundary of this channel was tested precisely on June 22 near the level mentioned above. The current technical setup suggests that price may move toward a test of the upper boundary of the channel, which currently stands around $275.
Indicators remain constructive and are not yet deeply overbought. However, the price has traded above the Bollinger Bands for at least two sessions. This suggests a brief consolidation or modest pullback toward $250–247 before the broader uptrend resumes.
The recent sector rotation suggests investors are increasingly looking beyond the mega-cap technology names that have dominated market leadership in recent years. With major indices still trading near record highs, capital may continue rotating toward sectors and companies that have lagged the broader rally but are beginning to show improving technical and fundamental characteristics.
