Broad Market Retreats Despite Semiconductor Gains, Rising Yields Pressure Small Caps
1min read The stock market is retreating midday, with the S&P 500 and Nasdaq Composite slipping 0.2 percent and 0.3 percent, respectively. Early gains, bolstered by strong momentum in semiconductor stocks following Broadcom's robust earnings and guidance, have faded as rising Treasury yields weigh on broader sentiment.
The 10-year yield climbed to 4.39 percent, marking a 24-basis point increase for the week. Similarly, the 2-year yield reached 4.24 percent, up 14 basis points. These moves come amid disappointing inflation data this week, including hotter-than-expected CPI and PPI figures, and indications of softening in the labor market.
Rising rates have had a pronounced effect on small-cap stocks, with the Russell 2000 shedding 1 percent today, pushing its weekly decline to 3 percent.
Despite the broader market weakness, semiconductor stocks have emerged as a standout, driven by Broadcom's stellar quarterly results and encouraging guidance. The PHLX Semiconductor Index (SOX) is up 2.3 percent, although some influential chipmakers have pared earlier gains. NVIDIA, for instance, has reversed course, trading 2.8 percent lower after being up as much as 1.6 percent earlier.
In the energy market, WTI crude oil futures rose 1.1 percent to $70.77 per barrel, buoyed by a bullish forecast from the International Energy Agency. The IEA projected that global oil demand growth will accelerate from 840 kb/d in 2024 to 1.1 mb/d in 2025, pushing consumption to 103.9 mb/d.
Despite the positive outlook, WTI crude has struggled to maintain levels above $70 since September. Natural gas futures, meanwhile, dropped 4.1 percent to $3.31 per mmbtu, pressuring the energy sector, which is down 0.6 percent.
Economic Data Recap
Economic releases today offered little to alter the market’s trajectory. Export prices for November were flat month-over-month, while import prices ticked up 0.1 percent, with prices excluding oil unchanged. The data reflects muted inflationary pressures on trade, offering limited relief against broader inflation concerns highlighted earlier this week.
Outlook
As the market digests a combination of strong sector-specific performances, such as semiconductors, and broader pressures from rising yields, the near-term outlook remains mixed. Investors are likely to remain cautious, particularly as higher interest rates and inflationary pressures continue to cloud the macroeconomic landscape.
Energy markets, while showing signs of stabilization in oil, are also a point of uncertainty given mixed performance in natural gas and ongoing demand volatility.
The market's response over the coming sessions will hinge on further economic data and its implications for monetary policy as the Federal Reserve continues its delicate balancing act.
