After a powerful four-session advance that lifted the S&P 500 nearly 6% while carrying it to fresh record highs, stocks took a breather on Wednesday as investors digested another busy round of earnings reports and corporate headlines. The S&P 500 (-0.2%) finished modestly lower, while the Nasdaq Composite slipped 0.8% and the DJIA gained 0.5%. Despite the mixed finish, the S&P 500, DJIA, Russell 2000 (-0.6%), and S&P Mid Cap 400 (-0.5%) all notched fresh record intraday highs before retreating from their best levels.

The broader tone nevertheless remained constructive, as another encouraging earnings backdrop and continued progress toward easing tensions in the Middle East helped offset some profit-taking after this week's powerful rally.

The communication services sector (-2.4%) finished as the market's weakest performer. Alphabet (GOOG 360.13, -15.22, -4.05%) came under pressure after The Wall Street Journal reported that Google Chief Scientist and AI strategy leader Jeff Dean will leave the company to launch a startup focused on scientific discovery.

The sector also faced pressure from wireless providers after SpaceX (SPCX 108.27, -17.06, -13.61%) said on its earnings call that it plans to enter the wireless market.

Weakness in Amazon (AMZN 272.65, -4.77, -1.72%) and Tesla (TSLA 321.55, -5.80, -1.77%) further highlighted today's pause across several of the market's recent mega-cap leaders, leaving the consumer discretionary sector (-0.3%) modestly lower despite relative strength elsewhere.

The information technology sector spent most of the session with a solid gain but retreated to finish little changed as the PHLX Semiconductor Index slipped 1.4% into the close. Advanced Micro Devices (AMD 482.05, -36.53, -7.04%) was a notable laggard after a strong run into its earnings report. NVIDIA (NVDA 219.22, +7.28, +3.43%) remained a notable source of support after SpaceX said on its earnings call that it plans to build exclusively on NVIDIA's Vera Rubin architecture, helping keep the sector out of negative territory.

Attention now shifts to another important test for the memory trade after the close, with Sandisk (SNDK 1350.50, -77.12, -5.40%) and Western Digital (WDC 519.17, -29.39, -5.36%) set to report earnings. Both stocks also came under pressure into the close ahead of their reports.

Outside of technology, leadership remained familiar. The materials sector (+1.5%) outperformed behind continued strength in precious metals prices, lifting Newmont Corporation (NEM 104.27, +6.54, +6.69%) among the day's best-performing S&P 500 components.

The health care sector (+1.3%) also finished near the top of the leaderboard as Eli Lilly (LLY 1168.77, +53.09, +4.76%) and Amgen (AMGN 407.83, +17.81, +4.57%) built on well-received earnings reports, with the latter helping support the DJIA.

The energy sector (-2.0%) remained under pressure as WTI crude oil futures settled down $0.55 (-0.7%) at $75.18 per barrel. The Wall Street Journal reported that Iran and Oman are finalizing a draft agreement to reopen the Strait of Hormuz that would prohibit Iran from charging tolls or transit fees, reinforcing expectations that disruptions to global oil shipments could continue to ease.

Elsewhere, the utilities sector (-1.0%) remained out of favor as investors continued rotating away from more defensive areas of the market.

Although today's session interrupted the market's recent string of outsized gains, the underlying backdrop changed little. Earnings results have generally continued to exceed expectations, geopolitical risks have eased further, and today's relatively orderly consolidation followed one of the strongest four-session advances of the year. Investors will now look to another round of semiconductor earnings to determine whether technology leadership can reassert itself after today's pause.

U.S. Treasuries inched higher on Wednesday, securing their third consecutive advance that pressured yields on longer tenors to one-week lows. The 2-year note yield settled down two basis points to 4.18%, and the 10-year note yield settled down one basis point to 4.62% . 

• Russell 2000: +21.7% YTD
• S&P Mid Cap 400: +16.4% YTD
• Nasdaq Composite: +13.4% YTD
• DJIA: +13.1% YTD
• S&P 500: +12.8% YTD

Reviewing today's data:

• Weekly MBA Mortgage Applications Index -2.9%; Prior -6.4%
• July ADP Employment Change 44K (Briefing.com consensus 75K); Prior was revised to 95K from 98K
• July S&P Global U.S. Services PMI - Final 54.6; Prior 53.6
• July ISM Non-Manufacturing Index 54.1% (Briefing.com consensus 54.7%); Prior 54.0%
  • The key takeaway from the report is the understanding that services sector activity continues to run at a solid pace despite the persistence of ongoing cost pressures.