Stocks finished broadly lower on Tuesday as a steep reversal across semiconductor and other momentum-oriented stocks outweighed gains in several defensive and commodity-linked areas. The S&P 500 (-0.7%) and Nasdaq Composite (-1.3%) suffered the largest declines, while the DJIA (-0.2%) fared considerably better thanks to its limited semiconductor exposure and strength in several of its defensive components.

Technology was at the center of the retreat. The information technology sector (-1.9%) finished at the bottom of the sector standings as the PHLX Semiconductor Index tumbled 5.0%, erasing yesterday's advance and then some. Memory stocks were among the weakest areas after rallying Monday, while pronounced selling across optical and electronic manufacturing names added to the pressure.

Fabrinet (FN 482.52, -116.06, -19.39%) plunged despite reporting better-than-expected Q4 results and issuing above-consensus Q1 guidance. Although Fabrinet is not an S&P 500 component, related names Lumentum (LITE 873.31, -95.59, -9.87%), Coherent (COHR 306.12, -45.10, -12.84%), and Teradyne (TER 404.29, -38.85, -8.77%) were among the index's worst performers, adding to the weakness across the semiconductor-related trade.

The selloff also spilled into industrial names tied to the semiconductor and AI infrastructure buildout, helping push the industrials sector (-1.5%) firmly lower. Separately, Caterpillar (CAT 840.83, -40.82, -4.63%) was another notable laggard after posting a solid gain yesterday.

Weakness among the market's largest growth stocks added to the pressure, with the Vanguard Mega Cap Growth ETF falling 1.1%. Meta Platforms (META 543.67, -25.30, -4.45%) was a notable laggard and weighed on the communication services sector (-0.6%) as opening arguments began in a child social-media addiction case.

Persistently high borrowing costs remained another obstacle for growth stocks, even as Treasury yields backed away from their highest levels of the morning. The rate backdrop also remained particularly relevant for housing after today's economic data showed a sharp decline in July housing starts and a larger-than-expected drop in pending home sales.

There were still meaningful pockets of strength. The health care (+1.6%) and consumer staples (+1.1%) sectors benefited from the rotation toward defensive stocks, helping the DJIA avoid the steeper losses seen elsewhere. Johnson & Johnson (JNJ 271.12, +8.75, +3.33%) and Coca-Cola (KO 88.82, +1.84, +2.12%) were among the positive contributors, while Amgen (AMGN 425.28, +5.90, +1.41%) rose to a fresh all-time high, extending its advance since the company's Q2 beat-and-raise earlier this month.

On the earnings front, Home Depot (HD 337.67, -0.21, -0.06%) gave up a firm gain following a solid Q2 report in which adjusted earnings, revenue, total comparable sales, and U.S. comps topped expectations. The company nevertheless maintained its FY27 outlook as management continued to point to challenging housing conditions and weakness in larger discretionary projects.

The energy sector (+1.8%) topped the sector standings as crude oil continued its recent climb amid renewed geopolitical uncertainty. WTI crude approached $85 per barrel as the market digested an overnight strike on a cargo ship in the Strait of Hormuz and President Trump's acknowledgment that another ceasefire with Iran is not being pursued. Crude ultimately settled $0.42 higher (+0.5%) at $84.88 per barrel.

The market's underlying tone also deteriorated as the session progressed. Early strength across several sectors had initially kept the broader market relatively insulated from the technology selloff, but the weakness eventually spread, leaving the Russell 2000 (-1.3%) and S&P MidCap 400 (-1.6%) with sizable losses alongside the major averages. Tuesday's session ultimately reflected a pronounced unwind in some of the market's strongest momentum trades, led by semiconductors and related AI infrastructure names. Defensive and energy stocks offered meaningful support, particularly to the DJIA, but elevated rates, higher oil prices, and increasingly broad selling left the market with a considerably weaker finish than the relatively narrow technology-driven decline seen earlier in the day.

U.S. Treasuries staged a modest rebound on Tuesday, but not before opening selling briefly lifted the 30-year yield to a fresh high for the year (5.326%). The 2-year note yield finished unchanged at 4.18%, and the 10-year note yield settled down two basis points to 4.71%. 

• Russell 2000: +21.6% YTD
• S&P Mid Cap 400: +16.6% YTD
• Nasdaq Composite: +13.1% YTD
• S&P 500: +12.4% YTD
• DJIA: +11.0% YTD

• July Housing Starts 1.239 mln (Briefing.com consensus 1.360 mln); Prior was revised to 1.415 mln from 1.427 mln, July Building Permits 1.443 mln (Briefing.com consensus 1.390 mln); Prior was revised to 1.374 mln from 1.367 mln
  • The key takeaway from the report, though, is the broad-based weakness in single-unit starts seen in July, which is a month that featured rising interest rates that increased the cost of financing.
• July Import Prices -0.4%; Prior was revised to -0.3% from 0.3%
• July Import Prices ex-oil 0.4%; Prior was revised to 0.1% from 0.4%
• July Export Prices -1.3%; Prior was revised to -0.7% from -0.6%
• July Export Prices ex-ag. -1.5%; Prior -0.7%
• July Industrial Production 0.2% (Briefing.com consensus 0.3%); Prior was revised to 0.3% from 0.1%, July Capacity Utilization 76.3% (Briefing.com consensus 76.3%); Prior was revised to 76.2% from 76.1%
  • The key takeaway from the report is that gains were registered by all three major industry groups, led by a 0.5% increase in utilities that stemmed from hot weather increasing air-conditioning use.
• July Pending Home Sales -2.3% (Briefing.com consensus 1.3%); Prior was revised to -4.8% from -5.4%