Stock Market Update

[BRIEFING.COM] The S&P 500 (-0.5%) and DJIA (-0.2%) are modestly lower shortly after midday, while the Nasdaq Composite (-1.0%) underperforms as elevated Treasury yields and a sharp retreat across semiconductor and other mega-cap technology stocks pressure the market.

Longer-term Treasury yields remain near multi-year highs, creating a challenging backdrop for growth stocks even as expectations for additional near-term Fed tightening have eased following last week's inflation reports. The elevated-rate environment is particularly evident across technology and other higher-duration areas of the market, while this morning's weak housing data provided another reminder of the pressure higher borrowing costs continue to exert on the economy.

The information technology sector (-1.9%) holds the widest loss as the PHLX Semiconductor Index tumbles 5.3%, reversing yesterday's strong showing. Memory stocks are among the notable laggards, while Coherent (COHR 309.55, -41.67, -11.86%) is the weakest S&P 500 component. The weakness extends across much of the semiconductor-related trade, with electrical equipment names contributing to the industrials sector's (-1.2%) underperformance, while Caterpillar (CAT 839.85, -41.80, -4.74%) also moves sharply lower afer a nice gain yesterday.

Mega-cap stocks elsewhere are also under pressure, leaving the Vanguard Mega Cap Growth ETF down 0.8%. Meta Platforms (META 550.62, -18.35, -3.23%) is a notable laggard and weighs on the communication services sector (-0.3%) as opening arguments in a child social-media addiction case are set to begin today. Still, today's weakness remains concentrated heavily in technology and other momentum-oriented areas rather than reflecting an indiscriminate market selloff.

Seven S&P 500 sectors trade higher even as decliners outpace advancers by roughly 3-to-2 on the NYSE and 5-to-3 on the Nasdaq. The S&P 500 Equal Weighted Index (+0.1%) holds on to a slight gain.

Defensive groups are providing some of the strongest leadership. The health care (+1.7%) and consumer staples (+1.4%) sectors are among the top performers, with Johnson & Johnson (JNJ 271.16, +8.79, +3.35%), Amgen (AMGN 425.32, +5.94, +1.42%), and Coca-Cola (KO 88.65, +1.67, +1.92%) helping the DJIA hold a considerably narrower loss than the Nasdaq. The DJIA also has relatively limited exposure to today's semiconductor selloff outside of NVIDIA (NVDA 220.40, -4.60, -2.05%).

Home Depot (HD 339.89, +2.01, +0.60%) is another positive contributor after reporting a solid Q2 beat, with adjusted earnings, revenue, total comparable sales, and U.S. comps all exceeding expectations. The company nevertheless reaffirmed its FY27 outlook as management remains cautious about housing conditions and larger discretionary projects. That caution was underscored by this morning's housing data, which showed a sharp decline in July housing starts and a larger-than-expected drop in pending home sales.

The energy sector (+1.4%) is another standout as crude oil rises modestly amid continued uncertainty surrounding the U.S.-Iran conflict. President Trump said there are currently no talks scheduled with Iran and that the U.S. naval blockade remains in effect, while maintaining that the Strait of Hormuz is open and operating.

Overall, elevated long-term interest rates and a sharp reversal in semiconductor stocks are weighing heavily on the major averages, particularly the Nasdaq. However, strength across seven S&P 500 sectors and pronounced leadership from defensive groups have kept the broader market from matching the magnitude of the selloff in technology.

Reviewing today's data:

• July Housing Starts 1.239 mln (Briefing.com consensus 1.360 mln); Prior was revised to 1.415 mln from 1.427 mln, July Building Permits 1.443 mln (Briefing.com consensus 1.390 mln); Prior was revised to 1.374 mln from 1.367 mln
  • The key takeaway from the report, though, is the broad-based weakness in single-unit starts seen in July, which is a month that featured rising interest rates that increased the cost of financing.
• July Import Prices -0.4%; Prior was revised to -0.3% from 0.3%
• July Import Prices ex-oil 0.4%; Prior was revised to 0.1% from 0.4%
• July Export Prices -1.3%; Prior was revised to -0.7% from -0.6%
• July Export Prices ex-ag. -1.5%; Prior -0.7%
• July Industrial Production 0.2% (Briefing.com consensus 0.3%); Prior was revised to 0.3% from 0.1%, July Capacity Utilization 76.3% (Briefing.com consensus 76.3%); Prior was revised to 76.2% from 76.1%
  • The key takeaway from the report is that gains were registered by all three major industry groups, led by a 0.5% increase in utilities that stemmed from hot weather increasing air-conditioning use.
• July Pending Home Sales -2.3% (Briefing.com consensus 1.3%); Prior was revised to -4.8% from -5.4%