The major averages started the week on a lower note as a sharp selloff in semiconductor stocks and another increase in crude oil overshadowed strength across software, defensive groups, and select mega-cap names. The S&P 500 (-0.5%), Nasdaq Composite (-0.6%), and DJIA (-0.3%) finished with modest losses after spending much of the session well below their opening levels, while the S&P 500 Equal Weighted Index ended unchanged.

Selling was considerably more pronounced during the morning, when the S&P 500 briefly slipped below 7,600 as crude oil topped $104 per barrel and the 10-year note yield moved above 5.0%. Those pressures moderated as the day progressed, allowing the major averages to recover a sizable portion of their early declines.

The retreat in oil from its session high was an important factor behind the market's recovery. WTI crude settled $1.15 higher (+1.2%) at $101.23 per barrel, well below its morning peak. The initial surge followed the shutdown of Saudi Arabia's East-West pipeline and the postponement of planned discussions between Gulf states and Iran regarding shipping through the Strait of Hormuz. Some of the geopolitical pressure subsequently eased after President Trump said Iran wants to reach an agreement quickly and that the U.S. is open to talks.

The day's most pronounced weakness was concentrated in semiconductor and AI infrastructure stocks. The PHLX Semiconductor Index plunged 5.9%, dragging the information technology sector (-1.7%) lower as renewed debate surrounding AI safety raised the possibility that development of increasingly powerful models could eventually face constraints. Weakness spilled into other beneficiaries of the AI infrastructure buildout, contributing to the industrials sector's (-1.4%) decline. Corning (GLW 143.50, -22.90, -13.76%), Teradyne (TER 329.20, -50.52, -13.30%), and Coherent (COHR 266.50, -38.87, -12.73%) were among the worst-performing S&P 500 components, with Corning facing the additional headwind of a prospectus supplement related to an equity distribution agreement covering up to $2 billion of common stock.

OpenAI CEO Sam Altman's indication that an IPO this year would be ill-advised provided another talking point surrounding the AI landscape.

The other side of the AI trade looked dramatically different. The iShares GS Software ETF surged 5.0%, led by outsized gains in cybersecurity stocks as concerns surrounding increasingly autonomous AI systems drew greater attention to potential security threats. CrowdStrike (CRWD 235.38, +28.64, +13.85%), Palo Alto Networks (PANW 373.94, +43.29, +13.09%), and Gartner (IT 197.07, +17.48, +9.73%) finished among the best-performing S&P 500 components, creating a stark contrast with the heavy selling across semiconductor stocks.

Strength elsewhere also helped keep the broader market's losses relatively contained. Alphabet (GOOG 345.71, +10.26, +3.06%) and Meta Platforms (META 665.60, +17.57, +2.71%) powered the communication services sector (+2.8%) to the top of the standings, while investors also gravitated toward defensive areas.

The health care (+1.4%) and consumer staples (+1.3%) sectors posted solid gains, with Kroger (KR 60.91, +2.42, +4.14%) extending its positive momentum following last week's earnings report. The utilities sector (-1.3%) was a notable exception to the defensive strength.

Monday's session ultimately featured a sharp rotation beneath relatively modest losses for the major averages. Semiconductor and AI infrastructure stocks bore the brunt of the selling, while software, cybersecurity, communication services, and defensive groups provided meaningful offsets. The recovery from the morning lows also coincided with some easing in two major macro headwinds as crude retreated from above $104 and the 10-year yield moved back below 5.0%, although soft market breadth suggested buying interest remained selective. Attention now shifts to Wednesday's FOMC decision as the week's primary scheduled catalyst.

There was no economic data of note today.

U.S. Treasuries began the week with modest gains in most tenors after an early continuation of last week's selling found mid-morning resistance, sparking a shallow bounce. The 2-year note yield settled down one basis point to 4.63% and the 10-year note yield settled down one basis point to 4.96%. 

• Russell 2000: +16.5% YTD
• Nasdaq Composite: +12.7% YTD
• S&P Mid Cap 400: +11.3% YTD
• S&P 500: +11.3% YTD
• DJIA: +9.1% YTD

There was no economic data of note today.