The major averages finished broadly lower on Tuesday as a sharp surge in oil prices, escalating U.S.-Iran hostilities, and weakness across technology and other growth stocks weighed on the market. The S&P 500 (-0.7%), Nasdaq Composite (-1.0%), and DJIA (-0.8%) all ended with sizable losses, while the Russell 2000 (-1.2%) and S&P Mid Cap 400 (-1.1%) also struggled.

Crude oil was the central influence on today's action, extending its intraday surge to settle $4.45 higher (+5.2%) at $90.28 per barrel. Oil prices had already been sharply higher during the morning before the geopolitical situation escalated around midday, when U.S. Central Command confirmed that U.S. forces had begun striking Islamic Revolutionary Guard Corps targets in Iran following recent attempted attacks against commercial shipping in the Strait of Hormuz and American service members deployed to the region.

President Trump later said via Truth Social that the U.S. was conducting "large and powerful" strikes against Iranian targets near the Strait of Hormuz in retaliation for Iran's attack on Jordan. He also warned that any Iranian retaliation would be met with strikes at a "much harder and higher level" and suggested an even larger attack remains an option. Iran issued threats of retaliation of its own, with Axios reporter Barak Ravid quoting the IRGC as saying, "A severe punishment awaits the aggressors. The United States will regret its latest attacks."

The escalation erased an earlier attempt by the major averages to recover from their opening losses and kept pressure on equities through the afternoon. Higher Treasury yields provided an additional headwind, particularly for technology and other growth-oriented stocks, while increased expectations for a rate hike at this month's FOMC meeting also remained in focus.

The information technology sector (-1.0%) finished among the weakest performers as both semiconductor and software stocks came under pressure. The PHLX Semiconductor Index fell 2.1%, while the iShares Expanded Tech-Software Sector ETF dropped 3.5%, with packaged software names among the day's notable laggards. Apple (AAPL 325.13, +8.28, +2.61%) was an important exception, advancing as John Ternus officially took over as CEO and helping offset some of the broader technology weakness.

Several technology names also faced pronounced selling ahead of earnings reports after the close. Dell (DELL 424.82, -31.18, -6.84%) retreated sharply ahead of its Q2 report, with expectations elevated following the company's strong Q1 results and outlook, while Palo Alto Networks (PANW 362.09, -20.04, -5.24%) also lagged ahead of its fiscal Q4 report.

The consumer discretionary sector (-1.9%) finished at the bottom of the sector standings amid broad pressure on oil- and rate-sensitive names. Amazon (AMZN 254.92, -4.85, -1.87%) and Tesla (TSLA 356.09, -11.86, -3.22%) were notable mega-cap laggards, contributing to the broader weakness across growth stocks. The Vanguard Mega Cap Growth ETF finished 1.0% lower.

The industrials sector (-1.4%) was another major source of weakness as the surge in oil prices pressured many of its components. Axon (AXON 518.30, -48.26, -8.52%) finished as the worst-performing S&P 500 component. The materials (-1.4%) and financials (-0.9%) sectors also posted sizable losses as cyclical stocks joined growth names in underperforming.

The other side of today's rotation was evident across energy and defensive areas of the market. The energy sector (+1.5%) finished comfortably higher as crude oil surged above $90 per barrel, while the utilities (+0.7%), health care (+0.6%), and consumer staples (+0.2%) sectors also ended in positive territory as investors sought more defensive positions.

Edison (EIX 58.79, +4.81, +8.91%) and PG&E (PCG 14.06, +0.78, +5.92%) were notable standouts in the utilities sector after KCRA News reporter Ashley Zavala reported that the California Assembly will kill the wildfire liability plan agreed to by lawmakers and Gov. Newsom just days ago. The proposed plan had been a source of concern for PG&E and Southern California Edison because it would not have allowed the utilities to shift future wildfire costs to insurance.

Meanwhile, Moderna (MRNA 154.27, +13.93, +9.93%) continued to experience sharp swings following its recent surge on positive melanoma-vaccine results.

Ultimately, Tuesday's session was dominated by the sharp rise in crude oil and escalating U.S.-Iran hostilities. The midday U.S. strikes and subsequent threats of further escalation from both sides pushed crude above $90 per barrel and reinforced the pressure already facing equities from elevated Treasury yields. Energy and defensive sectors benefited from the resulting rotation, but broad weakness across technology, cyclical stocks, and smaller companies left the major averages firmly lower to begin what has historically been one of the weakest months for the stock market.

U.S. Treasuries tried to fight off early weakness on Tuesday but could not escape selling pressure that sent yields on 10-year note and shorter tenors to fresh highs for the year. The 2-year note yield settled up four basis points to 4.39%, and the 10-year note yield settled up four basis points to 4.80%. 

• Russell 2000: +17.7% YTD
• S&P Mid Cap 400: +12.6% YTD
• Nasdaq Composite: +12.3% YTD
• S&P 500: +11.5% YTD
• DJIA: +9.8% YTD

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