Stock Market Update

[BRIEFING.COM] The major averages are firmly lower at midday, with the S&P 500 (-0.7%), Nasdaq Composite (-0.9%), and DJIA (-0.8%) pressured by another spike in oil prices, elevated Treasury yields, and weakness across technology and other growth stocks. The Russell 2000 (-1.1%) and S&P Mid Cap 400 (-1.0%) hold even wider losses. 

Stocks initially recovered from their opening lows as crude oil and Treasury yields eased from their early highs and semiconductor stocks narrowed their losses. That improvement proved short-lived, however, as the market turned lower again around midday amid renewed geopolitical concerns. U.S. Central Command confirmed that U.S. forces began striking Islamic Revolutionary Guard Corps targets in Iran at 12:00 p.m. ET following recent attempted attacks against commercial shipping in the Strait of Hormuz and American service members deployed to the region.

Crude oil has climbed sharply alongside the renewed tensions, with WTI crude currently up $3.55 (+4.1%) to $89.30 per barrel. The 10-year note yield has also returned to 4.79%, testing its high for the session and adding another source of pressure for equities.

Six S&P 500 sectors trade lower, with weakness concentrated in technology and other growth-oriented areas. The information technology sector (-1.1%) is among the laggards as the PHLX Semiconductor Index (-2.0%) remains under pressure despite a sharper opening decline. Software stocks are even weaker, leaving the iShares Expanded Tech-Software Sector ETF down 3.5%, with packaged software names among the worst-performing S&P 500 components.

Apple (AAPL 325.68, +8.82, +2.79%) is a notable exception to the technology weakness, trading solidly higher as John Ternus officially takes over as CEO today, succeeding longtime chief Tim Cook, who will remain with the company as executive chairman. The consumer discretionary sector (-1.7%) holds an even wider loss as Tesla (TSLA 356.58, -11.37, -3.09%) gives back the bulk of yesterday's advance, while the industrials sector (-1.5%) is another notable laggard as many of its components are pressured by today's surge in oil prices. Broader weakness across mega-cap stocks has left the Vanguard Mega Cap Growth ETF down 0.8%.

Growth stocks are also contending with increased expectations for a rate hike at this month's FOMC meeting. The CME FedWatch Tool now assigns a 66.2% probability to a 25-basis-point rate hike at the September 16 meeting, up sharply from 39.6% a week ago.

Meanwhile, several defensive areas continue to outperform. The consumer staples (+0.5%), health care (+0.4%), and utilities (+0.3%) sectors remain in positive territory, while the energy sector (+0.8%) is benefiting from the sharp rise in crude oil prices.

The health care sector is also receiving support from several company-specific developments. Medtronic (MDT 92.60, +1.94, +2.15%) is higher after beating Q1 expectations and raising its FY27 organic revenue growth outlook, while Moderna (MRNA 147.81, +7.47, +5.32%) is the top-performing S&P 500 component as it continues to experience sharp swings following its massive surge on positive melanoma-vaccine results. Outside the S&P 500, Novartis AG (NVS 160.89, +8.83, +5.81%) is sharply higher after remibrutinib met the primary endpoint in both Phase III REMODEL trials for relapsing multiple sclerosis.

Overall, today's weakness reflects several overlapping headwinds, with rising oil prices and Treasury yields weighing on equities alongside pronounced weakness in technology and other growth stocks. The midday escalation in U.S.-Iran hostilities has added to those pressures, pushing crude back toward its session high and sending the major averages back toward their worst levels of the day despite relative strength across defensive areas of the market.

Reviewing today's data:

• August S&P Global U.S. Manufacturing PMI - Final 53.9; Prior 53.2
• July Construction Spending -0.5% (Briefing.com consensus 0.2%); Prior was revised to 0.0% from -0.1%
  • The key takeaway from the report is the weakness in the residential sector and particularly in new single-family construction, which is being tested by higher financing costs.
• August ISM Manufacturing Index 54.6% (Briefing.com consensus 55.3%); Prior 55.6%
  • The key takeaway from the report is that slower growth was indicated across most report categories. The notable exception was prices, which increased at the same pace as the prior month.
• July JOLTs - Job Openings 7.271 mln (Briefing.com consensus 7.390 mln); Prior was revised to 7.182 mln from 7.359 ml