Stocks steadily lost ground throughout Thursday's session, leaving the S&P 500 (-0.9%), Nasdaq Composite (-1.0%), and DJIA (-1.3%) at their session lows as rising oil prices, higher interest rates, and weakness across retail and mega-cap stocks weighed on the market.

The session represented a reversal of some of Wednesday's rate-relief trade. Yesterday's announcement that the Treasury Department will increase the size of its liquidity-support buybacks had helped push yields lower and supported a broad advance in equities, but some of that relief faded today as rates moved higher again.

Oil provided another source of pressure after President Trump threatened renewed economic measures against Iran. Treasury Secretary Scott Bessent later added that he will hold a press conference Monday to discuss additional actions against the country, which he described as potentially the "greatest coordinated economic isolation in the history of the world." WTI crude continued its recent climb, settling $2.47 higher (+2.9%) at $88.15 per barrel.

The combination of higher rates and oil prices weighed particularly heavily on the consumer discretionary sector (-1.8%). Cruise lines, homebuilders, and apparel stocks were among the laggards, with the iShares U.S. Home Construction ETF falling 2.5% as some of Wednesday's rate relief reversed. Advance Auto (AAP 42.39, -13.79, -24.55%) plunged following its earnings report and weighed on other auto-parts stocks.

Retail weakness extended to the consumer staples sector (-1.9%), which finished with one of the day's widest losses as Walmart (WMT 103.84, -10.46, -9.15%) sank following its earnings report, which featured a disappointing Q3 outlook.

Higher oil prices also contributed to weakness in the industrials sector (-1.2%), with airlines retreating as the jump in crude raised concerns about fuel costs. Defense stocks were another source of weakness as the U.S. emphasized economic measures against Iran, sending the iShares U.S. Aerospace & Defense ETF down 3.6%. Still, Deere (DE 620.94, +40.31, +6.94%) and Nordson (NDSN 334.70, +24.78, +8.00%) provided notable pockets of post-earnings strength within the sector.

Selling was also pronounced in the health care sector (-1.9%). Moderna (MRNA 133.32, -41.06, -23.55%) gave back another portion of yesterday's massive rally following the positive cancer-vaccine results, while Intuitive Surgical (ISRG 374.48, -23.24, -5.84%) was another notable laggard.

Technology stocks held up considerably better. The information technology sector (-0.4%) posted one of the narrowest losses, while the PHLX Semiconductor Index gained 0.5% after two sessions of sharp declines. Memory stocks and several other chip names rebounded amid the pronounced swings that have characterized the group this week.

That semiconductor resilience did not extend to mega-cap growth stocks more broadly, however. The Vanguard Mega Cap Growth ETF fell 0.9%, adding pressure to the major averages as the session progressed.

By the close, the energy (+0.4%) and real estate (+0.2%) sectors were the only S&P 500 sectors to escape with gains.

Crypto-related stocks were also a bright spot, with Coinbase Global (COIN 172.35, +12.15, +7.58%) ranking among the S&P 500's best performers as President Trump's push for Congress to pass the CLARITY Act helped fuel a rally across crypto-linked stocks.

Weakness also extended beyond the large-cap benchmarks. The Russell 2000 (-1.3%) and S&P MidCap 400 (-0.9%) finished near their session lows as higher rates and oil prices weighed on the broader market.

Thursday's steady deterioration reflected a combination of macro and company-specific pressures. The reversal of some of Wednesday's rate relief and a nearly 3% jump in oil prices created a difficult backdrop, while weakness following several retail earnings reports added to the selling. Semiconductor stocks provided a rare pocket of strength, but that was not enough to offset weakness across mega-cap stocks and an increasingly broad retreat that left the major averages at their worst levels of the day.

U.S. Treasuries retreated on Thursday with the long bond giving back the bulk of its gain that was recorded after the U.S. Treasury announced an increase to its maximum buybacks of longer tenors. The 2-year note yield settled up one basis point to 4.19%, and the 10-year note yield settled up four basis points to 4.70%. 

• Russell 2000: +20.6% YTD
• S&P Mid Cap 400: +15.3% YTD
• Nasdaq Composite: +12.2% YTD
• S&P 500: +11.6% YTD
• DJIA: +9.8% YTD

Reviewing today's data:

• August Philadelphia Fed Index 47.4 (Briefing.com consensus 25.0); Prior 41.4
• Weekly Initial Claims 206K (Briefing.com consensus 206K); Prior was revised to 212K from 209K, Weekly Continuing Claims 1.799 mln; Prior was revised to 1.781 mln from 1.777 mln
  • The key takeaway from the report is that even with the increase in four-week moving averages for initial and continuing claims, overall levels are not setting off alarm bells concerning increased layoff activity.
• July Leading Economic Index 0.2% (Briefing.com consensus -0.1%); Prior was revised to -0.1% from -0.2%