U.S. equities ended Monday's regular session with modest losses, as a sharp decline in semiconductor shares pressured the broader market despite easing Treasury yields. The S&P 500 slipped 0.26% to 7,654.13 by 14:02 EDT, while the SPDR S&P 500 ETF (SPY) traded 0.23% lower at $763.94 by 15:29 EDT. The moves reflected a steady, mild retreat from recent highs.
Beneath the surface, a more telling divergence emerged. The Invesco S&P 500 Equal Weight ETF (RSP) edged up 0.03%, creating a 0.26 percentage point gap versus SPY. This indicates that the day's losses were concentrated among the index's largest components rather than being broad-based. The S&P 500 is weighted by market capitalization, with the largest companies exerting an outsized influence on the index's direction.
The iShares Semiconductor ETF (SOXX) dropped 2.33% to $507.92, with Nvidia (NVDA) falling nearly 2.45% to $209.47. Other chipmakers also suffered, with Micron (MU) down 5.6% and Broadcom (AVGO) off 2.1%, as previously reported by Reuters. The weakness in technology contrasted with strength in financials, as the Technology Select Sector SPDR Fund (XLK) slipped 1.50% while the Financial Select Sector SPDR Fund (XLF) rose 1.13%.
The 2.63-point differential between the two sector funds marked the session's most evident sign of sector rotation. Investors appeared to rotate out of high-flying tech names into more value-oriented sectors, a trend that has been building as concerns over AI-related spending and valuations persist.
Semiconductors did manage to bounce off their intraday lows. SOXX dipped to $499.06 before climbing 1.78% to $507.92, while SPY recovered 0.24% from its session low of $762.12. This rebound helped ease short-term strain but did not fully offset the day's losses.
Attention now turns to Wednesday, when Nvidia is scheduled to report fiscal second-quarter earnings after the market close. The company previously posted $81.6 billion in revenue, with $75.2 billion attributed to its data center segment. "Nvidia must deliver strong results if it wants to help stabilize a key part of the stock market," said Richard Reyle, chief investment officer at Questar Capital Partners.
Rates remain a critical factor. The 30-year Treasury yield held above 5%, despite reports of potential Treasury bond-buyback assistance. The yield's persistence has been a headwind for equities, particularly for growth and technology stocks that are more sensitive to discount rates.
On the economic front, July personal income and outlays data, including the Federal Reserve's preferred PCE inflation gauge, are due Wednesday at 08:30 EDT. The release could influence expectations for the Fed's next policy move, adding another layer of uncertainty for markets.
Market breadth was weak but not deteriorating. On the NYSE, declining stocks outnumbered advancers by a 1.21-to-1 ratio, yet the S&P 500 posted 16 new 52-week highs versus seven new lows. This pattern suggests the selloff was more of a technology-focused retracement than a broad-based equity decline.
Looking ahead, a strong Nvidia report combined with stable long-term yields could quickly narrow the gap between sectors. Conversely, a guidance miss, softer AI demand, or a renewed climb in the 30-year yield could extend semiconductor losses to the wider index. Friday's Jackson Hole speech by Fed Chair Powell adds another potential catalyst for rate-sensitive markets.
