Closing Bell: Semiconductors Lead While Rising Yields Pressure Small Caps
Markets trimmed gains Wednesday in the face of renewed U.S.-Iran military tensions, stronger labor and services data, and continued leadership from semiconductor equipment and memory stocks.
The S&P 500 fell 0.74% to 7,553.68, the Nasdaq Composite declined 0.89% to 26,853.98, and the Dow Jones Industrial Average lost 1.21% to 50,687.84. The Russell 2000 was the weakest major index, reflecting continued pressure on smaller companies from higher interest rates. Crude oil climbed above $96 per barrel, while the Dollar Index rose 0.31% to 99.53, Bitcoin fell 2.95%, and the VIX closed above 16 amid geopolitical uncertainty.
The market continues rewarding AI infrastructure winners while becoming increasingly selective elsewhere.
Three things to watch from today's market:
Strong Economic Data Pushes Yields Higher
Economic data reinforced the view that the U.S. economy remains resilient. ADP reported 122,000 private-sector jobs added in May, ahead of April's revised 105,000 increase. Meanwhile, the ISM Services PMI rose to 54.5, above both consensus expectations and April's reading, while factory orders also exceeded forecasts. Together, the data pushed Treasury yields higher as investors reduced expectations for near-term Federal Reserve rate cuts. Higher yields weighed most heavily on the Russell 2000 and other rate-sensitive areas of the market.
Semiconductor Leadership Continues to Broaden
Despite weakness in NVIDIA (NVDA), the Philadelphia Semiconductor Index (SOX) gained nearly 1.4%, extending its run to new highs. Leadership came from semiconductor equipment manufacturers Applied Materials (AMAT), KLA Corp. (KLAC), and Lam Research (LRCX), alongside memory and storage names Micron (MU), Seagate (STX), and Sandisk (SNDK).
Defensive Rotation Emerges Beneath the Surface
Although technology remained a relative bright spot, broader sector performance pointed to caution. Rising oil prices supported Energy stocks, while Staples and Health Care attracted defensive flows. At the same time, one of the most notable market divergences remains intact: the SOX semiconductor index continues making new highs while the IGV software index remains near multi-year lows
Economic Events/Data Tomorrow (ET)
8:30 AM: Initial Jobless Claims
8:30 AM: Productivity and Costs (Q1 Final)
10:30 AM: EIA Natural Gas Storage Report
12:00 PM: Mortgage Rates
4:30 PM: Fed Balance Sheet
Earnings Calendar (ET)
- Premarket: Medtronic (MDT), Macy's (M), Ollie's Bargain Outlet (OLLI), Cognyte Software (CGNT)
- Postmarket: Broadcom (AVGO), CrowdStrike (CRWD), Veeva Systems (VEEV), Five Below (FIVE), PVH Corp. (PVH), C3.ai (AI), Petco Health & Wellness (WOOF)
- Before Market Open (Friday): Ciena (CIEN), G-III Apparel (GIII), Toro (TTC)
- After Market Close (Friday): Lululemon Athletica (LULU), Autodesk (ADSK), DocuSign (DOCU), Smartsheet (SMAR)
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