JPMorgan technical strategist Jason Hunter warns that weakening market internals point to a possible downturn heading into fall, even though the major indexes still look bullish on the surface. The S&P 500 is on pace to post its worst weekly decline since early June, and Hunter says the rotation out of AI-linked stocks echoes patterns seen at the 1999-2000 tech peak.
Stocks are headed for a weekly decline, and JPMorgan sees further downside ahead. The S&P 500 entered Friday's session down 1.9% week to date, on pace to snap a three-week advance. It would also mark the benchmark's worst weekly decline since early June.
Rising yields and Middle East uncertainty weigh on stocks
Rising Treasury yields and uncertainty over the war in the Middle East, coupled with signs of slower consumer spending, pressured equities this week. Hunter said the broad indexes are still bullishly trending and have "not yet given any clear warning signs that a downturn is imminent." However, he added that a deeper look at market internals, shifts in leadership, and the technical setups across markets that typically lead the broader tape raise concern heading into late-summer and early-fall seasonality.
AI rotation lacks conviction
Hunter said the rotation away from artificial intelligence names during June and July didn't happen with conviction. Unlike the fourth quarter of 2025, when the shift had a pronounced pro-cyclical theme, he described this round as an unrelated mix of position unwinds, attempts to rotate away from crowded technology exposure, and a shift toward parts of the market that could be seen as defensive.
Echoes of the 2000 tech peak
Hunter also said AI stocks are showing similarities to the 1999-2000 period, when tech stocks skyrocketed only to crash and send the broader market into a bear market. He noted that hyperscalers saw some rotation into the underperforming group as hardware stocks set back, but the moves were uneven within the group, and the broad basket of these stocks remains below key 2026 range resistance. Given the parallels to the late stages of the 1999-2000 communications-equipment capex cycle, Hunter said he continues to see these developments as a meaningful risk heading into post-Labor Day seasonality.
Source: CNBC
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