Daily Sector Wrap
| Updated: 28-Aug-26 16:29 ET |
| Closing Market Summary: Stocks retreat as rate-hike odds jump |
The major averages finished a choppy Friday modestly lower, with the S&P 500 (-0.3%) and Nasdaq Composite (-0.5%) declining while the DJIA ended near its flatline. The market saw relatively little movement during the afternoon after an eventful morning shaped by Fed Chair Kevin Warsh's Jackson Hole address, rising Treasury yields, and a sharp retreat in semiconductor stocks. Despite today's losses, all three major averages secured gains for the week. Warsh's remarks were the main driver of the session. The Fed Chair emphasized that inflation remains above the central bank's 2% target and said price stability should be its predominant focus at this point. His comments prompted a significant repricing of near-term policy expectations, with the probability of a 25-basis-point rate hike at the September FOMC meeting rising sharply to 57.5% from 35.4% yesterday. Treasury yields climbed in response, with the pressure particularly pronounced at the shorter end of the curve. The move weighed more heavily on smaller stocks, leaving the Russell 2000 (-1.4%) and S&P Mid Cap 400 (-1.2%) with considerably wider losses than the major averages. The major averages initially took the hawkish policy shift in stride, rallying to session highs during the morning behind strength in non-semiconductor mega-cap stocks. Those gains moderated as the session progressed, but remained enough to lift the consumer discretionary (+1.7%) and communication services (+1.6%) sectors to the top of the sector standings behind solid gains in Amazon (AMZN 266.43, +10.17, +3.97%) and Alphabet (GOOG 342.88, +5.17, +1.53%) . Apple (AAPL 319.70, +5.12, +1.63%) and Microsoft (MSFT 513.53, +8.47, +1.68%) also advanced, providing some support for the major averages despite weakness elsewhere in the information technology sector (-1.3%). Semiconductor stocks were the largest source of pressure, sending the PHLX Semiconductor Index down 3.5%. NVIDIA (NVDA 217.48, -10.50, -4.61%) gave back a sizable portion of yesterday's post-earnings surge, while Marvell (MRVL 216.62, -24.83, -10.28%) was a notable laggard following its quarterly report. Software stocks also surrendered some of yesterday's earnings-driven gains, although the selling was considerably less pronounced. The iShares Expanded Tech-Software Sector ETF declined 0.7%, with Workday (WDAY 204.72, +11.15, +5.76%) standing out on the upside following its earnings report. Six S&P 500 sectors ultimately finished lower. In addition to the information technology sector, the utilities (-1.1%) and industrials (-1.0%) sectors were among the main laggards. While the financial sector (+0.3%) notched a modest gain, PayPal (PYPL 53.66, -7.81, -12.71%) finished as the worst-performing S&P 500 component after Bloomberg reported that the Advent/Stripe consortium abandoned its planned leveraged buyout valued at more than $50 billion, although the companies could resume discussions at a later date. Ultimately, Fed Chair Warsh's Jackson Hole address set the tone for Friday's session, driving a hawkish repricing of September policy expectations and pushing Treasury yields higher, particularly at the shorter end of the curve. Strength in several non-semiconductor mega-cap stocks helped limit the damage at the headline-index level, but weakness in semiconductors and smaller stocks left the broader market under pressure. Even so, the major averages held onto enough of their earlier weekly gains to finish the week in positive territory. U.S. Treasuries had a rough finish to the week with yields on 3-year and 5-year note yields hitting fresh highs for the year while the long bond outperformed but could not secure a higher finish. The 2-year note yield settled up 12 basis points to 4.35% (+12 basis points this week), and the 10-year note yield settled up five bais points to 4.72% (-2 basis points this week).
Reviewing today's data:
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