U.S. equities fell for a second straight session Tuesday as a relentless climb in Treasury yields and another leg higher in crude oil forced investors to price in a genuine risk that the Federal Reserve will raise interest rates this month.
The Nasdaq 100 led the decline, sliding 1.4% as the most expensive corners of software cracked.
West Texas Intermediate crude rose 3.2% to $88.53 a barrel, a second consecutive advance, with the blockage of the Strait of Hormuz still choking regional exports after renewed U.S.-Iran strikes in the Persian Gulf. Brent added 2.5% to $92.78.
The knock-on effects are spreading. Asian spot LNG prices hit a five-month high, EU natural gas jumped 4.2% and heating oil surged 5%, keeping the inflation impulse alive well beyond the crude complex.
The yield on the 10-year Treasury note climbed to 4.78%, up roughly 1 basis point and higher for a fifth straight session, its loftiest level since January 2025. The 2-year yield rose 2 basis points to 4.38%, while the 30-year bond held at 5.25%.
Markets now price in roughly a 68% probability of a 25-basis-point rate hike from the Fed this month, up sharply from about 40% a week ago, after Fed Chair Kevin Warsh reiterated his commitment to bringing inflation down at the Jackson Hole Symposium.
A hotter-than-expected 3.3% flash reading on Eurozone inflation added to the global tightening consensus, with the European Central Bank now widely expected to follow.
The S&P 500 fell 0.5% to 7,650, hitting a four-week low earlier in the session, while the Dow Jones Industrial Average shed 0.5% to 52,939.
The Nasdaq 100 was the clear laggard, down 1.4% to 29,054. The Russell 2000 fell 0.7% to 2,935.
Gold offered no shelter, sliding 1.6% to $4,368 an ounce as rate-hike expectations lifted real yields, leaving bullion struggling below $4,400. Silver dropped 1.9% to $65.27.
Tuesday’s Performance In Major US Indices
According to the market data platform:
- The Vanguard S&P 500 ETF VOO fell 0.5%.
- The SPDR Dow Jones Industrial Average ETF Trust DIA slid 0.5%.
- The Invesco QQQ Trust QQQ dropped 1.4%.
- The iShares Russell 2000 ETF IWM declined 0.7%.
Software Multiples Snap While Defensives Catch A Bid
The Consumer Staples Select Sector SPDR Fund XLP led all S&P 500 sectors with a 0.8% gain, the textbook defensive response to a hawkish rates shock.
The Health Care Select Sector SPDR Fund XLV rose 0.6%, the Utilities Select Sector SPDR Fund XLU added 0.5% and the Energy Select Sector SPDR Fund XLE gained 0.3% on the crude bid.
At the other end, the Consumer Discretionary Select Sector SPDR Fund XLY fell 1.2%, with the Technology Select Sector SPDR Fund XLK and the Industrials Select Sector SPDR Fund XLI each down 1.1%. The Materials Select Sector SPDR Fund XLB shed 0.8%.
Among industry groups, the VanEck Agribusiness ETF MOO was the standout gainer, up 1.1% as wheat pushed toward a three-and-a-half-year high and soybeans jumped 2.2%.
The iShares Biotechnology ETF IBB added 0.4%. On the downside, the VanEck Gold Miners ETF GDX tumbled 2.0% alongside bullion, the First Trust Dow Jones Internet Index Fund FDN lost 1.5%, and the U.S. Global Jets ETF JETS dropped 1.3% as higher jet fuel costs bit.
Axon Enterprise, Inc. AXON was the worst performer in the index, plunging 9.2% to $514. Today’s move looks like the sharpest expression of a broad de-rating in the market’s most richly valued software names.
CrowdStrike Holdings, Inc. CRWD fell 6.9% to $215.06 even after announcing it had crossed a $2 billion milestone with channel partner Optiv, with the stock giving back part of a roughly 97% year-to-date advance through Monday’s close.
The selling swept the entire cybersecurity complex.
Palo Alto Networks, Inc. PANW dropped 5.4% to $361.33 with investors de-risking ahead of its fiscal fourth-quarter results, due after the close Tuesday. Fortinet, Inc. FTNT slid 5.3% to $161.85 with no company-specific catalyst, caught in the same sector-wide retreat.
The de-rating extended to electronic design automation. Cadence Design Systems, Inc. CDNS fell 5.6% to $319.72, with peer Synopsys, Inc. SNPS down 3.6%.
Elsewhere in software, Oracle Corp. ORCL lost 4.6%, Datadog, Inc. DDOG fell 4.4% and ServiceNow, Inc. NOW shed 3.7%. Dell Technologies Inc. DELL fell 4.3% ahead of its own report after the bell.
Tighter credit conditions hit capital-markets-sensitive names hard.
Blackstone Inc. BX dropped 4.1% and Apollo Global Management, Inc. APO lost 3.6%, while Interactive Brokers Group, Inc. IBKR fell 5.0%. Coinbase Global, Inc. COIN slid 4.7% with Bitcoin (CRYPTO: BTC) down 1.4% near $77,770.
Transports also struggled on the fuel-cost squeeze, with Old Dominion Freight Line, Inc. ODFL down 4.7% and CSX Corp. CSX off 3.8%.
Optical networking names Ciena Corp. CIEN and Lumentum Holdings Inc. LITE fell 5.1% and 4.9% respectively, with Ciena due to report Thursday morning.
On the winning side, Moderna Inc. MRNA topped the tape with a 7.0% gain to $150, a follow-through move from August’s surge on late-stage data for its Merck-partnered personalized mRNA melanoma vaccine.
The Mosaic Company MOS rose 3.8% to $25.04, moving instead with a broad bid across the agricultural complex as wheat climbed toward a three-and-a-half-year high and corn added 1.3%.
Peers followed: Corteva, Inc. CTVA gained 3.3%, Bunge Global SA BG added 2.6%, Archer-Daniels-Midland Company ADM rose 2.6% and Deere & Company DE climbed 2.4%.
Howmet Aerospace Inc. HWM advanced 3.8% to $254.22, following a steady stream of broker price-target increases in recent weeks, including RBC Capital to $350 and Morgan Stanley to $335.
Dollar Tree, Inc. DLTR gained 3.7% to $131.32. Dollar General Corp. DG rose 3.3%, Casey’s General Stores, Inc. CASY added 2.8% and The Kroger Co. KR gained 2.1%.
Managed care rallied in the same defensive trade.
CVS Health Corp. CVS climbed 3.3% to $96.97, moving alongside Elevance Health, Inc. ELV, up 2.8%, Centene Corp. CNC, up 2.6%, The Cigna Group CI, up 2.5%, and Humana Inc. HUM, up 2.1%.
The session’s cleanest earnings story was Medtronic plc MDT, which rose 2.5% to $92.88, after reporting fiscal first-quarter adjusted EPS of $1.45 versus the $1.39 consensus on revenue of $9.8 billion, up 13.7% and ahead of the $9.55 billion estimate.
Medtronic lifted full-year organic revenue growth guidance to 7.25%-7.75% from 6.75%-7.25% and raised its adjusted EPS range to $5.94â€"$6.00, with cardiovascular up 18.9% organically.
