A sharp reversal in crude oil handed U.S. equities a reprieve on Wednesday, with stocks grinding higher off six-week lows just hours before the Federal Reserve is expected to raise interest rates for the first time since 2023.
The S&P 500 added 0.4% to 7,615.70, while the Dow Jones Industrial Average was effectively flat at 52,113. The Nasdaq 100 outperformed, rising 0.9% to 29,198 as hardware and semiconductor names extended Tuesday's rebound from AI-safety jitters.
U.S. Energy Secretary Chris Wright told CNBC that the outage on Saudi Arabia's damaged East-West crude pipeline would be a "brief and temporary interruption" measured in days, and Riyadh moved to route additional barrels through Oman.
West Texas Intermediate crude slid 3.6% to $102.02 a barrel, slipping back below $103 after a 20.6% surge so far this month. Brent fell 3.3% to $105.17.
The cheaper barrel rippled straight into the Treasury market.
The 10-year yield eased 5 basis points to 4.96%, taking a breather after five straight sessions of gains that carried it to 5.04% on Tuesday, the highest since July 2007.
The reprieve does not change the Fed's arithmetic.
Markets price in roughly a 93% chance that the central bank will lift the target range by 25 basis points to 3.75%-4.00% this afternoon, its first hike in nearly three years, with another move expected by December.
Wednesday's data did nothing to soften the case: August retail sales jumped 1.2% month-over-month against forecasts of 0.8%, the control group used in GDP calculations surged 1.4% versus 0.4% expected, and import prices climbed 0.7%, well above the 0.4% consensus.
Wednesday's Performance In Major US Indices
According to the market data platform:
- The Vanguard S&P 500 ETF (NYSE:VOO) gained 0.4%.
- The SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA) edged up 0.1%.
- The Invesco QQQ Trust (NASDAQ:QQQ) climbed 0.8%.
- The iShares Russell 2000 ETF (NYSE:IWM) rose 0.5%.
Energy Stocks Pullback, Freight Stocks Hit by Lower Margins
The Energy Select Sector SPDR Fund (NYSE:XLE) was far and away the worst performer, sliding 2.1% as the crude reversal gutted producers.
The SPDR S&P Oil & Gas Exploration & Production ETF (NYSE:XOP) plunged 3.2% and the VanEck Oil Services ETF (NYSE:OIH) shed 1.3%. The Financial Select Sector SPDR Fund (NYSE:XLF) was the only other sector in the red, off 0.5%.
At the other end, the Technology Select Sector SPDR Fund (NYSE:XLK) led with a 1.0% gain, trailed by the Industrials Select Sector SPDR Fund (NYSE:XLI) at 0.9% and the Health Care Select Sector SPDR Fund (NYSE:XLV) at 0.6%.
Chips did the heavy lifting: the VanEck Semiconductor ETF (NASDAQ:SMH) jumped 1.7%, the best industry move on the board, while the iShares Biotechnology ETF (NASDAQ:IBB) added 0.9% and the SPDR S&P Metals & Mining ETF (NYSE:XME) rose 0.7%.
Forgent Power Solutions Inc. (NYSE:FPS) topped the large-cap board, rallying 11.6% after fourth-quarter revenue rose 94% year-over-year to $462 million and adjusted EBITDA jumped 163% to $113 million.
Record quarterly bookings of $1.5 billion left the company with a $3 billion backlog covering more than 90% of fiscal 2027 revenue guidance of $2.4 billion to $2.6 billion.
The rest of the leaderboard was an AI-connectivity pile-on with little hard news behind it.
Semtech Corp. (NASDAQ:SMTC) surged 11.0%, extending Northland's upgrade to Outperform with a $182 price target, which flagged connectivity as the AI bottleneck.
The optics complex moved together and, again, without a company-specific trigger.
Lumentum Holdings Inc. (NASDAQ:LITE) rose 8.2%, Credo Technology Group Holding Ltd (NASDAQ:CRDO) gained 8.0% and Coherent Corp. (NYSE:COHR) climbed 6.4%.
The correlated bounce looks like short covering after a brutal month for the group.
Astera Labs Inc. (NASDAQ:ALAB) rode the same wave, up 6.0%, alongside Dell Technologies Inc. (NYSE:DELL) at 5.2% and Intel Corp. (NASDAQ:INTC) at 5.0%.
J.B. Hunt Transport Services Inc. (NASDAQ:JBHT) collapsed 12.5% after a rare intra-quarter warning delivered at a Morgan Stanley conference.
The carrier guided third-quarter earnings to fall 5% to 10% from the second quarter, citing a $10 million fuel headwind and $25 million of added driver-related costs.
Chief Financial Officer Brad Delco said the company has seen "some of the most radical and abnormal swings" in fuel prices it has ever experienced.
Knight-Swift Transportation Holdings Inc. (NYSE:KNX) fell 3.9% in sympathy.
Permian operators took the brunt of the crude unwind, and all four of the next-worst names share the same catalyst.
Diamondback Energy Inc. (NASDAQ:FANG) dropped 9.0% on more than 14 times normal volume; its mineral-rights affiliate Viper Energy Inc. (NASDAQ:VNOM) fell 7.2%, Matador Resources Co. (NYSE:MTDR) lost 6.5%, and Permian Resources Corp. (NYSE:PR) slid 6.1%.
The Saudi pipeline restart headline and the reversal in the barrel account for the whole move, compounded by a government report showing crude inventories fell just 0.64 million barrels last week against expectations for a 1.6 million-barrel draw.
The damage ran deep through the patch. EOG Resources Inc. (NYSE:EOG) fell 5.5%, Occidental Petroleum Corp. (NYSE:OXY) lost 5.3%, ConocoPhillips (NYSE:COP) shed 4.8% and Devon Energy Corp. (NYSE:DVN) dropped 4.7%. Elsewhere, First Solar Inc. (NASDAQ:FSLR) fell 5.4% and crypto-linked names sold off, with Circle Internet Group Inc. (NYSE:CRCL) down 5.8%.
