Thursday's session ended with a notable divergence between technology stocks and the broader market, as a sharp semiconductor selloff kept the S&P 500 (-0.5%) and Nasdaq Composite (-1.3%) firmly lower despite improving participation elsewhere. The DJIA (+0.1%) finished slightly higher, while the Russell 2000 (flat) recovered substantially from earlier losses and the S&P Mid Cap 400 (+0.4%) outperformed.

Technology stocks were the central source of weakness, particularly after a Financial Times report that OpenAI's annualized revenue is running $20 billion below earlier estimates raised fresh questions about the pace of revenue growth supporting the AI infrastructure buildout. The report intensified selling across semiconductor and other AI-related stocks, leaving the PHLX Semiconductor Index down 3.4% and the information technology sector (-1.8%) at the bottom of the sector rankings. NVIDIA (NVDA 230.48, -6.99, -2.94%) was a notable mega-cap laggard, while b302.38, -32.18, -9.62%) and Corning (GLW 152.81, -10.44, -6.40%) were among the hardest-hit S&P 500 components.

Mega-cap performance was mixed overall, although the Vanguard Mega Cap Growth ETF fell 1.3%, underscoring the pressure on several of the market's largest growth names. Amazon (AMZN 254.06, -5.86, -2.25%) was another notable laggard, contributing to a 0.5% decline in the consumer discretionary sector.

Elsewhere in the sector, Chipotle Mexican Grill (CMG 32.65, +1.88, +6.10%) rallied following a Financial Times report that Starbucks (SBUX 93.21, -0.37, -0.40%) had worked with advisers on a potential takeover of the restaurant chain.

The day's weakness initially extended well beyond technology stocks as another surge in crude oil prices and elevated Treasury yields weighed on sentiment. WTI crude climbed more than 5.0% amid reports of escalating attacks on tankers in the Strait of Hormuz and earlier comments from President Trump suggesting that reaching a deal with Iran was not a priority. Oil subsequently retreated from its highs after President Trump said via Truth Social that the U.S. was engaged in productive discussions with Iran and would not launch additional attacks before the November 3 midterm elections. WTI crude ultimately settled $3.25 higher (+3.7%) at $91.47 per barrel, still a sizable increase but well below its intraday peak.

Treasury yields also reversed their earlier climb, providing some relief to the broader market. The 10-year note yield reached 5.35% before retreating as Treasuries benefited from the president's comments and solid demand at a $22 billion 30-year bond reopening. The pullback in yields helped stabilize several rate-sensitive areas, although it did little to arrest the selling in semiconductor stocks.

The improvement became increasingly evident beneath the surface as the session progressed. Six S&P 500 sectors finished higher, led by the energy sector (+2.9%), which benefited from the jump in crude oil prices. The consumer staples sector (+2.1%) was another standout as investors favored defensive stocks, with Coca-Cola (KO 87.77, +1.95, +2.27%) advancing alongside PepsiCo (PEP 128.88, +5.15, +4.16%), which reported better-than-expected quarterly earnings and revenue but lowered its FY26 earnings outlook.

The financials sector (+0.9%) also posted a solid gain, providing important support for the DJIA. Meanwhile, the health care sector (-0.4%) recovered considerably from its midday lows after biotechnology stocks and major pharmaceutical names faced pronounced selling pressure earlier in the session.

Market breadth illustrated the extent of the afternoon improvement. Advancers ultimately outnumbered decliners by roughly 8-to-5 on the NYSE after trailing by nearly 2-to-1 earlier in the session. Participation remained firmly negative on the Nasdaq, however, reflecting the persistent weakness across technology and semiconductor stocks.

The broader recovery was not enough to rescue the major averages, with the Nasdaq's 1.3% decline erasing its week-to-date gain. Still, the relative strength in small- and mid-cap stocks, improving breadth on the NYSE, and gains across six sectors suggested that the day's losses were increasingly concentrated in technology and AI-related names rather than reflecting uniform selling across the market.

U.S. Treasuries finished Thursday with gains across the curve after recovering from a poor start. Treasuries turned positive shortly after comments from President Trump indicating that no additional strikes on Iran were planned ahead of the midterm elections, with gains extending following a strong 30-year bond auction that built on yesterday's well-received 10-year note reopening. The 2-year note yield settled down one basis point to 4.76%, and the 10-year note yield settled down five basis points to 5.23%.

• Nasdaq Composite: +17.0% YTD
• S&P 500: +13.4% YTD
• Russell 2000: +12.6% YTD
• S&P Mid Cap 400: +10.4% YTD
• DJIA: +6.6% YTD

Reviewing today's data:

• For the week ending October 3, initial claims decreased 2,000 to 197,000 (Brieifng.com consensus: 200,000). Continuing claims for the week ending September 26 were up 17,000 to 1.716 million.
  
  • The key takeaway from the report is a broken (but pleasant-sounding) record: layoff activity continues to run at low levels that reflect a solid demand environment.
• Wholesale Inventories were up 0.5% month-over-month in August (Briefing.com consensus 0.7%) after increasing a revised 1.4% (from 1.3%) in July.