Stock Market Update

[BRIEFING.COM] The major averages remain under pressure at midday, though the market's leadership has shifted as the session has progressed. The S&P 500 (-0.5%), Nasdaq Composite (-0.7%), and DJIA (-0.3%) continue to trade lower, but a sharp rebound across semiconductor stocks has helped pare losses in the technology sector after a weak start. Instead, selling has broadened elsewhere in the market, leaving the energy sector (+0.8%) as the only S&P 500 sector posting a meaningful gain.

Semiconductor stocks have staged a notable recovery after opening under heavy pressure. The PHLX Semiconductor Index, which briefly fell more than 4% has trimmed nearly all of those losses and is down just 0.3% at midday. The group's early weakness followed Bloomberg reporting that investors were reassessing AI infrastructure spending after Chinese startup Moonshot AI unveiled its Kimi K3 model, fueling concerns that lower-cost AI models could temper future capital expenditures across the sector. As chipmakers recovered, the information technology sector also rebounded from a loss of nearly 2% to just 0.4%, while several memory-related names, including Seagate Tech (STX 787.40, +41.91, +5.62%), turned sharply higher after opening lower.

Despite the improvement in chipmakers, weakness across several other mega-cap technology stocks continues to weigh on the broader market. The communication services sector (-2.3%) remains the weakest-performing S&P 500 sector as Meta Platforms (META 650.08, -14.46, -2.18%), Alphabet (GOOG 346.77, -7.04, -1.99%) lag, with a post-earnings slide from Netflix (NFLX 69.13, -5.22, -7.02%) compounding the weakness.

The Vanguard Mega Cap Growth ETF is down 1.0%, although it has recovered meaningfully from its session lows.

Elsewhere, leadership has narrowed considerably as the day has progressed. The energy sector (+0.8%) is now the only S&P 500 sector posting a gain of more than 0.1% as WTI crude rises $3.13 (+4.0%) to $81.41 per barrel following reports of additional exchanges of fire between the U.S. and Iran, including Iranian strikes targeting U.S. forces in neighboring countries.

Although semiconductor stocks have recovered sharply from their morning lows, that improvement has done little to change the broader tone of the market. Selling has broadened beyond technology as the session has progressed, leaving the major averages firmly lower while renewed geopolitical tensions and higher oil prices continue to pressure the broader market.

Reviewing today's data:

• June Housing Starts 1.427 mln (Briefing.com consensus 1.328 mln); Prior was revised to 1.199 mln from 1.177 mln, June Building Permits 1.367 mln (Briefing.com consensus 1.403 mln); Prior was revised to 1.410 mln from 1.413 mln
  • The key takeaway from the report is that there wasn't any growth in single-unit starts or permits, which isn't a positive read for a housing market pinched by affordability issues.
• June Import Prices 0.3%; Prior was revised to 1.7% from 1.9%
• June Import Prices ex-oil 0.4%; Prior was revised to 0.7% from 0.8%
• June Export Prices -0.6%; Prior was revised to 1.2% from 1.3%
• June Export Price ex-ag -0.7%; Prior 1.2%
• June Industrial Production 0.1% (Briefing.com consensus 0.3%); Prior 0.1%, June Capacity Utilization 76.1% (Briefing.com consensus 76.2%); Prior was revised to 76.1% from 76.2%
  • The key takeaway from the report is that there was no increase in manufacturing output, something that hasn't happened since January.
• July Univ. of Michigan Consumer Sentiment - Prelim 54.4 (Briefing.com consensus 50.7); Prior 49.5
  • The key takeaway from the report was the correlation between lower gas prices and higher sentiment, the latter of which was pervasive across groups by age, wealth, income, and political party. Gas prices, though, have started to increase again with the military action between the U.S. and Iran, so it remains to be seen if this improved sentiment can be sustained.