The major averages finished near their session lows as afternoon selling broadened across the market, overwhelming an earlier recovery in semiconductor stocks. The S&P 500 (-1.0%), Nasdaq Composite (-1.4%), and DJIA (-0.8%) all ended firmly lower, both for the session and the week.

Semiconductor stocks briefly erased nearly all of their early losses around midday before turning lower again into the close. The PHLX Semiconductor Index fell 1.6%, while the information technology sector declined 1.1%. Cadence Design (CDNS 330.11, -34.54, -9.47%) was among the group's weakest performers after Bloomberg reported that Moonshot AI's Kimi K3 model designed a functional semiconductor chip in just 48 hours using open-source tools rather than proprietary electronic-design-automation software. Synopsys (SNPS 384.28, -32.76, -7.85%) was another laggard, while memory-related stocks held up comparatively well after recovering from sharp opening losses.

Weakness remained especially pronounced across mega-cap growth stocks. The communication services sector (-2.3%) finished with the widest loss as Meta Platforms (META 646.01, -18.53, -2.79%) and Alphabet (GOOG 346.12, -7.69, -2.17%) saw an extension of yesterday's losses. Elsewhere in the sector, Netflix (NFLX 68.95, -5.40, -7.26%) plunged lower after a disappointing earnings report.

The Vanguard Mega Cap Growth ETF fell 1.5%, reflecting additional weakness across several of the market's largest technology-oriented names.

The consumer discretionary sector (-1.6%) also finished among the laggards. Its mega-cap components traded lower, while travel-related stocks and homebuilders faced additional pressure as oil prices surged. The iShares U.S. Home Construction ETF fell 2.9%.

The deterioration was not confined to growth stocks. Early gains of more than 1% across several defensive sectors were fully erased, with health care (-0.4%), utilities (-0.7%), and consumer staples (-0.8%) all finishing lower. Intuitive Surgical (ISRG 345.42, -56.91, -14.15%) was the worst-performing S&P 500 component despite topping second-quarter estimates, as investors focused on an unchanged outlook that implies slower da Vinci procedure growth during the second half of the year.

The energy sector (+0.8%) was the only S&P 500 sector to post a gain as crude oil futures settled $2.69 higher (+3.4%) at $81.67 per barrel. Oil extended its advance after Axios reported that President Trump could decide within days whether to escalate military action against Iran, with options reportedly including strikes on Iranian infrastructure, nuclear facilities, and the underground Pickaxe Mountain site.

Ultimately, the semiconductor group's midday recovery briefly offered some support, but it failed to alter the market's broader trajectory. Renewed weakness in chipmakers, sustained pressure on mega-cap growth stocks, and a sharp reversal across previously stronger defensive areas left the major averages at their lows as rising oil prices and mounting geopolitical uncertainty weighed on sentiment.

U.S. Treasuries finished the week with modest gains in the 5-year note and longer tenors while the short end ended slightly lower after backtracking from early highs. The 2-year note yield settled up one basis point to 4.17% (-4 bais points this week), and the 10-year note yield settled down three basis points to 4.54% (-3 basis points this week). 

• Russell 2000: +19.4% YTD
• S&P Mid Cap 400: +14.2% YTD
• Nasdaq Composite: +9.8% YTD
• S&P 500: +8.9% YTD
• DJIA: +8.5% YTD

Reviewing today's data:

• June Housing Starts 1.427 mln (Briefing.com consensus 1.328 mln); Prior was revised to 1.199 mln from 1.177 mln, June Building Permits 1.367 mln (Briefing.com consensus 1.403 mln); Prior was revised to 1.410 mln from 1.413 mln
  • The key takeaway from the report is that there wasn't any growth in single-unit starts or permits, which isn't a positive read for a housing market pinched by affordability issues.
• June Import Prices 0.3%; Prior was revised to 1.7% from 1.9%
• June Import Prices ex-oil 0.4%; Prior was revised to 0.7% from 0.8%
• June Export Prices -0.6%; Prior was revised to 1.2% from 1.3%
• June Export Price ex-ag -0.7%; Prior 1.2%
• June Industrial Production 0.1% (Briefing.com consensus 0.3%); Prior 0.1%, June Capacity Utilization 76.1% (Briefing.com consensus 76.2%); Prior was revised to 76.1% from 76.2%
  • The key takeaway from the report is that there was no increase in manufacturing output, something that hasn't happened since January.
• July Univ. of Michigan Consumer Sentiment - Prelim 54.4 (Briefing.com consensus 50.7); Prior 49.5
  • The key takeaway from the report was the correlation between lower gas prices and higher sentiment, the latter of which was pervasive across groups by age, wealth, income, and political party. Gas prices, though, have started to increase again with the military action between the U.S. and Iran, so it remains to be seen if this improved sentiment can be sustained.