Stock Indices Waver on Strength in Chipmakers vs Weakness in Software Companies

The S&P 500 Index ($SPX) (SPY) is down by -0.15% today, the Dow Jones Industrial Average ($DOWI) (DIA) is down by -0.44%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.28%.  E-mini S&P futures (ESU26) are down -0.17%, and September E-mini Nasdaq futures (NQU26) are up +0.22%.

Stock indices are mixed today, with the Dow Jones Industrials falling to a 2-week low.  The strength in technology stocks is lifting the broader market today after stellar revenue growth at Anthropic PBC bolstered the view that spending on artificial intelligence will be sustained.  Anthropic told prospective investors that its Q2 revenue jumped by at least 14-fold from the same period last year, according to a report today by Bloomberg.  However, the weakness in software stocks is weighing on the Dow Jones Industrial Average. 

Stocks also found support on some better-than-expected US economic news.  The Aug Empire manufacturing survey general business conditions index unexpectedly rose +5.0 to a 4.5-year high of 20.6, stronger than expectations of a decline to 10.0.  Also, the Aug NAHB housing market index unexpectedly rose +1 to 35, stronger than expectations of a decline to 33.

Signs of weakness in China’s economy undercut global growth prospects and were negative for stocks.  China's July industrial production rose +4.5% y/y, weaker than expectations of +5.0% y/y.  Also, China's July retail sales rose +0.6% y/y, weaker than expectations of +1.5% y/y. In addition, the China July survey jobless rate rose +0.2 to 5.2%, showing a weaker labor market than expectations of 5.1%.  Finally, China's July new home prices fell -0.18% m/m, the thirty-eighth consecutive month home prices have declined.

Sep WTI crude oil prices (CLU26) are moving higher today amid fresh Israeli attacks on Iran-backed Hezbollah in Lebanon, dampening the prospects of ending hostilities in the Middle East and a quick reopening of the Strait of Hormuz.  Also, Israel has struck Iran-backed Hamas in Gaza, the Yemen- based Houthis have attacked ships in the Red Sea, and several vessels have been hit by projectiles in the Strait of Hormuz.  President Trump said today that the US naval blockade on Iranian ports is putting pressure on the country, and he has no timeline for resolving the US-Iran conflict.

Crude oil prices fell from their best level today on signs that Iran and Oman appear to be edging closer to a deal on how the Strait of Hormuz should be managed, agreeing on routes through the waterway.  Iranian Foreign Ministry spokesman Baghaei said finalizing a "shipping map" is part of a broader accord to govern traffic through the strait and constitutes an independent arrangement between the two states that will uphold their sovereignty and ensure the safe transit of vessels.

Treasury Secretary Bessent said last week that the administration will soon announce unprecedented economic measures against Iran that “have never been seen in the history of economic isolation of a country.”  The economic measures would add to the current US naval blockade of Iranian ports. 

There have been no signs of progress toward a US-Iran agreement to fully open the Strait of Hormuz.  An Iranian military spokesperson said last Thursday that no ship can safely pass the Strait of Hormuz without Iran’s authorization and supervision and that President Trump’s claims of control over the Strait are “nothing more than lies.”  The Iranian statement was in response to President Trump's comment last Tuesday that the US has “total control over the Hormuz Strait” and that “we own it.” 

The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.  So far, earnings results have been positive, with 85% of the 456 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 31% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets are higher today.  The Euro Stoxx 50 is up +0.03%.  China's Shanghai Composite climbed to a 5-week high and closed up +1.41%.  Japan's Nikkei-225 Stock Average closed up +0.74%.

Interest Rates

September 10-year T-notes (ZNU6) today are down -1.5 ticks.  The 10-year T-note yield is up +0.8 bp to 4.700%.  Higher WTI crude oil prices today are boosting inflation expectations and weighing on T-notes.  The 10-year breakeven inflation rate rose to a 3-week high of 2.296% today.  Also, today’s stronger-than-expected US economic news on the Aug Empire manufacturing index and Aug NAHB housing market index weighed on T-note prices.

European government bond yields are moving higher today.  The 10-year German bund yield rose to a 3-week high of 3.214% and is up +0.3 bp to 3.207%.  The 10-year UK gilt yield is up +0.1 bp to 5.038%. 

Markets are discounting a 92% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Chipmakers and AI-infrastructure stocks are edging higher today, a supportive factor for the broader market.  The iShares Semiconductor ETF (SOXX) is up more than +1%.  Sandisk (SNDK) is up more than +10% to lead gainers in the S&P 500 and Nasdaq 100, and Western Digital (WDC) and Marvell Technology (MRVL) are up more than +7%.  Also, Micron Technology (MU) and Applied Materials (AMAT) are up more than +5%, and Seagate Technology Holdings Plc (STX) is up more than +3%.  In addition, Microchip Technology (MCHP), Lam Research (LRCX), Intel (INTC), and Texas Instruments (TXN) are up more than +2%, and Analog Devices (ADI), ASML Holding NV (ASML), and Broadcom (AVGO) are up more than +1%.

Software stocks are under pressure today, limiting gains in the overall market. Datadog (DDOG) is down more than -3% to lead losers in the Nasdaq 100, and Adobe Systems (ADBE) and ServiceNow (NOW) are down more than -3%.  Also, Salesforce (CRM), Workday (WDAY), Atlassian Corp (TEAM), Autodesk (ADSK), Intuit (INTU), Oracle (ORCL), and Microsoft (MSFT) are down more than -2%. 

EyePoint (EYPT) is down more than -71% after saying its experimental treatment for an eye disease failed to meet its primary goal in a late-stage trial.

Constellation Brands (STZ) is down more than -5% to lead losers in the S&P 500 after Berkshire Hathaway announced that it liquidated its holdings in the company.

SentinelOne (S) and Netskope (NTSK) are down more than 4% after Deutsche Bank downgraded the stocks from buy to hold.

L3Haris Technologies (LHX) is down more than -3% after saying that Christopher Kubasik stepped down as CEO and chairman of the board, effective immediately.

Onto Innovation (ONTO) is up more than +4% after Goldman Sachs initiated a buy rating on the stock and a price target of $400.

Pulse Biosciences (PLSE) is up more than +3% after Needham & Co. initiated coverage on the stock with a buy recommendation and a $58 price target.

Astera Labs (ALAB) is up more than +2% after Northland Securities upgraded the stock to outperform from market perform with a price target of $350.

Earnings Reports (8/17/2026)

Fabrinet (FN), XP Inc (XP).