Stocks kicked off the third quarter on a relatively quiet note following a powerful second quarter for equities. The S&P 500 (-0.2%) and Nasdaq Composite (-0.7%) finished modestly lower after giving back earlier gains, while the DJIA finished on its flat line after touching another intraday record high. Despite a sharp pullback across semiconductor stocks, losses at the index level remained surprisingly contained as strength across several other mega-cap technology names and the broader market helped cushion the decline.

Semiconductor stocks paused after leading the market higher over the previous two sessions. The PHLX Semiconductor Index fell 6.3%, with weakness spanning memory names, chip equipment manufacturers, and AI infrastructure companies, suggesting the retreat was driven more by profit-taking than any single industry-specific development. Corning (GLW 220.70, -34.74, -13.60%) and KLA Corporation (KLAC 266.19, -35.52, -11.77%) finished among the S&P 500's weakest performers.

Despite the pressure on chipmakers, the broader technology complex proved far more resilient. The information technology sector (-1.8%) recovered from a steeper intraday decline as software stocks continued to outperform. The iShares Expanded Tech-Software ETF (IGV) climbed 3.0%, while Apple (AAPL 294.38, +5.02, +1.73%) and Microsoft (MSFT 384.28, +11.26, +3.02%) both posted solid gains.

Palantir Technologies (PLTR 125.73, +9.06, +7.77%) also outperformed after President Trump's latest financial disclosure showed he purchased between $100,000 and $250,000 worth of the company's shares. The Vanguard Mega Cap Growth ETF finished flat, underscoring the resilience across the market's largest growth stocks despite the sharp decline in semiconductor shares.

The communication services sector (+2.6%) finished with the widest gain, driven by Meta Platforms' (META 612.91, +49.62, +8.81%) surge after Bloomberg reported the company plans to build a cloud business that would sell access to AI computing infrastructure.

The consumer discretionary sector (+0.8%) also outperformed as Amazon (AMZN 241.70, +3.36, +1.41%), Tesla (TSLA 425.38, +4.78, +1.14%), and NIKE (NKE 43.06, +2.01, +4.90%) all finished higher. Nike's better-than-feared quarterly results helped reinforce investor confidence that the company's turnaround continues to make gradual progress despite management's cautious near-term outlook.

The financials sector (+2.1%) also posted broad-based gains. FactSet (FDS 245.55, +15.47, +6.72%) was among the sector's top-performing components after topping earnings expectations, while Coinbase Global (COIN 159.24, +13.05, +8.93%) and Robinhood Markets (HOOD 108.65, +8.37, +8.35%) advanced alongside a rebound in Bitcoin prices.

Elsewhere, the tone was more mixed. General Mills (GIS 37.77, +2.97, +8.53%) rallied after topping quarterly earnings expectations and issuing fiscal 2027 guidance that was broadly in line with estimates, though the consumer staples sector (-0.3%) still finished lower. Walmart (WMT 108.82, -4.44, -3.92%) remained under pressure after CNBC's David Faber reported that Cleveland Research issued a negative report citing slowing comparable sales and warning the retailer may need to lower prices to clear excess inventory.

Constellation Brands (STZ 136.88, -2.21, -1.59%) also declined despite beating earnings expectations and reaffirming its fiscal 2027 outlook.

The utilities sector (-1.1%) continued its recent underperformance, while the industrials sector (-1.1%) alos lagged as Caterpillar (CAT 991.41, -73.49, -6.90%) pulled back from record highs.

Crude oil futures settled $0.83 lower (-1.2%) at $68.69 per barrel as Axios reported that the U.S. is attempting to persuade Iran not to impose tolls on shipping through the Strait of Hormuz. Bloomberg separately reported that traffic through the waterway has increased to roughly 10 million barrels per day with support from the U.S. military, easing concerns about disruptions to global energy supplies.

Outside the S&P 500, the Russell 2000 (-0.4%) slipped into negative territory after reaching another intraday record high, while the S&P Mid Cap 400 (-0.8%) finished lower.

Overall, today's session suggested that investors remain willing to rotate within technology rather than broadly reduce risk following a powerful second quarter for equities. The PHLX Semiconductor Index endured a sizeable decline, yet the Vanguard Mega Cap Growth ETF finished flat and the S&P 500 Equal Weight Index (+0.2%) outperformed its market-weighted counterpart, highlighting the market's resilience beneath the surface. As the third quarter gets underway, today's action suggests the broadening in market participation remains intact even as leadership continues to evolve.

U.S. Treasuries extended this week's losses during the first session of July, though intraday action was largely confined to a sideways range near rebound highs. The 2-year note yield settled up two basis points to 4.16%, and the 10-year note yield settled up six basis points to 4.97%. 

• Russell 2000: +21.4% YTD
• S&P Mid Cap 400: +15.6% YTD
• Nasdaq Composite: +12.0% YTD
• S&P 500: +9.3% YTD
• DJIA: +8.8% YTD

Reviewing today's data:

• Weekly MBA Mortgage Applications Index 0.0%; Prior 1.0%
• June ADP Employment Change 98K (Briefing.com consensus 112K); Prior 122K
• June S&P Global U.S. Manufacturing PMI - Final 53.9; Prior 55.7
• May Construction Spending 0.1% (Briefing.com consensus 0.5%); Prior was revised to 0.3% from 0.4%
  • The key takeaway from the report is that public construction spending was the driver of the modest growth in total construction spending in June. Private construction spending activity was disappointing.
• June ISM Manufacturing Index 53.3% (Briefing.com consensus 53.8%); Prior 54.0%
  • The key takeaway from the report is that there was a general slowdown indicated versus May across most components of the report, yet the slowdown that will matter most is the one seen in the prices index, which is still quite high but nonetheless moving in the preferred direction.