U.S. equity markets declined during the week as a sharp pullback across semiconductor and momentum stocks, combined with rising oil prices and elevated Treasury yields, weighed on investor sentiment. The S&P 500 fell 1.4%, while the Nasdaq Composite declined 2.1% as growth stocks significantly underperformed. Smaller companies also retreated, with the Russell 2000 falling 1.6% and the S&P MidCap 400 losing 2.4%. Energy was among the sector leaders as WTI crude oil climbed 5.4% to $88.34 per barrel following the expiration of the U.S.-Iran ceasefire and renewed geopolitical tensions in the Middle East. Materials and health care also posted gains, supported by surging precious metals prices and strong earnings and company news. Conversely, industrials and information technology led the weekly declines, with the PHLX Semiconductor Index tumbling 5.5% as selling hit memory, optical, and AI infrastructure names. Developed international and emerging markets experienced mixed trading as global markets digested elevated energy costs and shifting rate expectations.
Fixed income markets declined as rising oil prices and persistent fiscal supply concerns pushed Treasury yields higher despite midweek Treasury buyback announcements. The 10-year Treasury yield rose four basis points to 4.74%, while the 2-year Treasury yield increased six basis points to 4.24%. Midweek relief from the U.S. Department of the Treasury’s plan to double liquidity-support buybacks proved short-lived as yields resumed their upward path later in the week. FOMC minutes revealed that most officials favored holding rates steady, though several supported a 25-basis-point hike and many noted that further monetary tightening could be necessary if disinflation stalls, keeping pressure on rate-sensitive fixed income assets.
Economic data released during the week was light but pointed to steady activity in manufacturing and services alongside a firm labor market, even as housing metrics faced headwinds from elevated mortgage rates. Flash August S&P Global U.S. PMIs showed the Services PMI expanding to 56.8 from 54.6 and Manufacturing PMI remaining in expansion territory at 53.2. Weekly initial jobless claims held steady at a low 206,000, signaling continued employer reluctance to conduct broad layoffs. In housing, July housing starts fell to a 1.239 million annualized rate and pending home sales dropped 2.3%, reflecting the impact of higher financing costs on buyers. Overall, the data highlighted resilient underlying growth alongside persistent inflation risks, supporting expectations that the Federal Reserve will maintain a cautious, data-dependent stance at upcoming policy meetings.