The major averages finished Tuesday's session with mixed results, but the relatively subdued performance of the S&P 500 (+0.3%) and Nasdaq Composite (flat) masked a considerably stronger showing across the broader market. The DJIA (+1.0%) outperformed, while the Russell 2000 (+1.7%) and S&P Mid Cap 400 (+1.0%) posted sizable gains as buying interest shifted away from the mega-cap stocks that led yesterday's rebound.

That rotation was particularly evident in the S&P 500 Equal Weighted Index (+1.2%), which substantially outperformed its market-cap-weighted counterpart after finishing lower yesterday. The Vanguard Mega Cap Growth ETF (-0.2%), meanwhile, ended modestly lower as investors remained cautious toward technology and AI-related stocks ahead of several closely watched earnings reports.

The session began with pronounced selling pressure in semiconductor stocks, with the PHLX Semiconductor Index (-0.3%) falling nearly 2% shortly after the opening bell and briefly erasing the entirety of yesterday's advance. Bargain hunting subsequently lifted the index into positive territory, helping the major averages recover from their mixed opening and reach session highs during the morning. However, the rebound in semiconductor stocks proved difficult to sustain, and renewed selling pressure during the afternoon left the information technology sector (-0.3%) modestly lower at the close. Despite giving back some of its intraday gains, the S&P 500 managed to finish above its 50-day moving average (7,704).

Weakness among several influential mega-cap names also weighed on the Nasdaq Composite. The communication services sector (-0.9%) finished at the bottom of the S&P 500 standings, pressured by losses in Meta Platforms (META 694.25, -11.19, -1.59%) and Alphabet (GOOG 336.40, -3.76, -1.11%). Netflix (NFLX 68.66, -1.19, -1.70%), which spent much of the morning near its flat line, also retreated ahead of its earnings report after the close.

Despite the continued hesitation surrounding technology stocks, the broader market benefited from a sharp reversal in crude oil prices and some relief in Treasury yields. WTI crude briefly climbed above $110 per barrel early in the session before retreating sharply following unconfirmed reports from Israeli media that a compromise proposal aimed at easing tensions between the U.S. and Iran had received preliminary approval from both sides. Subsequent comments attributed to an unnamed official disputing reports that an agreement was close prompted some recovery in oil prices, although WTI ultimately settled $2.15 lower (-2.1%) at $101.09 per barrel. The energy sector (+0.2%) finished with a modest gain following choppy trading.

The retreat in oil prices and easing rate pressures helped support gains across several areas of the market that have struggled recently. The Russell 2000's outperformance was particularly notable following a six-week losing streak that saw the small-cap benchmark fall as much as 11.5% from its mid-August high amid elevated interest rates and concerns about additional Fed tightening. Regional bank stocks contributed to today's rebound, while the financials sector (+1.1%) was among the stronger performers.

Nine of the 11 S&P 500 sectors finished higher, highlighting the broad participation that helped offset weakness among several influential mega-cap stocks. The health care sector (+2.3%) led the advance by a considerable margin, supported by substantial buying interest in pharmaceutical and biotechnology stocks. The iShares Nasdaq Biotechnology ETF gained 3.2%, while Eli Lilly (LLY 1285.15, +44.81, +3.61%) and Biogen (BIIB 243.10, +9.62, +4.12%) were among the notable standouts after reaching fresh 52-week highs, including a new all-time high for Eli Lilly.

The real estate sector (+1.7%) also benefited from some easing in Treasury yields, while the utilities sector (+1.2%) and consumer discretionary sector (+0.7%) recorded solid gains. The strength across these groups helped offset weakness in the market's largest technology-related components, reinforcing the distinction between the major averages' relatively modest headline performance and the more constructive action beneath the surface.

On the earnings front, Northrop Grumman (NOC 534.15, +23.50, +4.60%), Hasbro (HAS 109.52, +11.03, +11.20%), Equifax (EFX 176.50, +17.93, +11.31%), and 3M (MMM 171.43, +9.42, +5.81%) were among the S&P 500's strongest performers following favorable quarterly results, while GE Aerospace (GE 299.92, -11.36, -3.65%) and General Motors (GM 77.10, -5.65, -6.83%) suffered sharp declines despite exceeding earnings expectations.

Looking ahead, Netflix and SpaceX (SPCX 147.79, -0.17, -0.11%) are scheduled to report after today's close, while Wednesday brings results from Meta Platforms and Tesla (TSLA 373.71, +5.65, +1.54%), marking what many consider the true beginning of the third-quarter earnings season.

Today's session offered an encouraging indication that buying interest remains intact despite the recent volatility in technology stocks. The outperformance of small- and mid-cap stocks, along with the sizable advance in the equal-weight S&P 500 and gains in nine sectors, suggests that investors remain willing to pursue opportunities outside the mega-cap growth trade. That rotation is consistent with an underlying bullish market environment, although the relatively cautious trading in technology stocks also reflects a wait-and-see approach ahead of major earnings reports. With expectations for the largest companies already elevated, investors will be looking for results and guidance strong enough to justify increasingly demanding growth assumptions.

U.S. Treasuries had a mixed showing on Tuesday with longer tenors defending their gains throughout the day while the front end finished modestly lower. The 2-year note yield settled up three basis points to 4.79%, and the 10-year note yield settled down two basis points to 5.12%. 

• Nasdaq Composite: +13.7% YTD
• S&P 500: +12.7% YTD
• Russell 2000: +11.8% YTD
• S&P Mid Cap 400: +10.5% YTD
• DJIA: +9.2% YTD

Reviewing today's data:

• Total housing starts were down 5.2% month-over-month in September to a seasonally adjusted annual rate of 1.221 million (Briefing.com consensus: 1.305 million) following an upwardly revised 1.288 million (from 1.275 million) in August. Building permits were down 0.2% month-over-month to a seasonally adjusted annual rate of 1.400 million (Briefing.com consensus: 1.390 million).
  • The key takeaway from the report is that there was no growth in permits for single-unit dwellings in any region. Building permits are a leading indicator, and the lack of growth is a reflection of the constraints builders and homebuyers alike face from higher financing costs.
• Sep Building Permits 1400K (Briefing.com consensus 1390K; Prior 1403K revised from 1394K)
• Sep Pending Home Sales -7.3% (Briefing.com consensus 0.1%; Prior 0.3%)