The major averages finished lower on Tuesday as rising oil prices and renewed geopolitical tensions created a difficult backdrop for equities to begin the holiday-shortened week. The S&P 500 (-0.6%), Nasdaq Composite (-0.3%), and DJIA (-1.2%) all ended in negative territory, with pronounced health care weakness contributing to the blue-chip average's underperformance. The Russell 2000 (-0.5%) and S&P Mid Cap 400 (-0.7%) finished mostly in line with the broader market.

Crude oil remained a central influence throughout the session, settling $1.52 higher (+1.7%) at $93.02 per barrel following another pickup in Middle East hostilities over the weekend, including an exchange of strikes between the U.S. and Iran and a Houthi attack on a Saudi energy facility. The increase added to the difficult backdrop for equities, although the energy sector (+1.0%) benefited from the move and joined the utilities sector (+0.9%) as the only two S&P 500 sectors to finish higher.

Geopolitical concerns remained elevated into the afternoon. Reports indicated that the U.S. struck Iranian oil tankers as explosions were reported near Kharg Island, Iran's primary oil export hub, while Iran reportedly launched another attack against U.S. Navy ships. Crude oil continued to climb following the settlement as the headlines reinforced concerns surrounding further escalation and potential disruptions to regional energy supplies.

Elsewhere, the health care sector (-2.6%) finished at the bottom of the sector standings. Amgen (AMGN 393.17, -44.06, -10.08%) was among the day's weakest S&P 500 components after clinical trial setbacks at Novartis AG (NVS 137.70, -22.29, -13.93%) weighed on related names, while biotechnology stocks also faced considerable pressure. Amgen's sharp decline had an outsized impact on the DJIA and contributed significantly to its underperformance.

The financials sector (-1.4%) was another notable laggard amid broadly lower trading across the group.

Some oil- and rate-sensitive areas of the market also faced pronounced selling pressure, with the iShares U.S. Home Construction ETF falling 3.1%.

Meanwhile, the information technology sector (-0.2%) held up considerably better than the broader market thanks to continued strength across semiconductor stocks. The PHLX Semiconductor Index gained 1.3%, helping offset a 1.8% decline in the iShares GS Software ETF as well as weakness in NVIDIA (NVDA 225.73, -4.63, -2.01%) and other mega-cap stocks. Several company-specific catalysts contributed to the semiconductor outperformance. Intel (INTC 104.47, +8.67, +9.05%) rallied following positive analyst commentary and reports of potential price increases, while Advanced Micro Devices (AMD 505.74, +28.17, +5.90%) advanced after upbeat commentary regarding accelerating AI demand and its server CPU opportunity. Qualcomm (QCOM 174.09, +5.35, +3.17%) also gained after highlighting a multi-year agreement with Amazon (AMZN 256.97, -1.54, -0.60%) covering custom silicon and optical connectivity solutions, which management described as significant validation for its expanding data center business.

Optical stocks were another notable pocket of strength after Verizon (VZ 50.41, +0.27, +0.54%) and Corning (GLW 165.99, +11.69, +7.58%) announced a multi-billion dollar agreement covering more than 80 million miles of high-density optical fiber and connectivity solutions from 2027 through 2032. The agreement provided a positive read-through for the broader optical infrastructure market, helping propel sizable gains in Lumentum (LITE 978.54, +97.28, +11.04%) and Coherent (COHR 301.88, +20.02, +7.10%).

Tuesday's decline ultimately reflected broad weakness beneath the surface, with only two S&P 500 sectors finishing higher. Rising oil prices and renewed geopolitical tensions remained important headwinds, while sharp losses in health care and financial stocks added to the pressure. Semiconductor strength provided a meaningful counterweight and helped limit the Nasdaq Composite's decline, but investors generally remained cautious ahead of the August Producer Price Index on Thursday and Consumer Price Index on Friday, both of which could influence rate expectations ahead of next week's FOMC meeting.

U.S. Treasuries began the week with modest losses after failing to bounce from their lower start. The U.S. Treasury kicked off this week's note auction slate with a solid $58 billion 3-year note offering, which will be followed by a 10-year note sale tomorrow. The 2-year note yield settled up two basis points to 4.40%, and the 10-year note yield settled up two basis points to 4.81%. 

• Russell 2000: +19.3% YTD
• S&P Mid Cap 400: +13.7% YTD
• Nasdaq Composite: +13.7% YTD
• S&P 500: +12.1% YTD
• DJIA: +9.8% YTD

Reviewing today's data:

• Total consumer credit increased by $18.1 bln in July  (Briefing.com consensus $11.3 bln) while the June increase was revised down to $14.5 bln from $14.2 bln.
• The NFIB Small Business Optimism Index fell to 98.7 in August (Briefing.com consensus 99.3) from 99.8 in July.