U.S. stock indexes traded mixed on Wednesday as investors weighed a soft patch in parts of the software and memory-chip sectors against pockets of strength from company earnings and resilient labor-market data. The S&P 500 rose 0.17%, while the Dow slipped 0.03% and the Nasdaq 100 fell 0.30%, reflecting pressure in higher-duration technology names.
Software and semiconductors led the downside after several earnings reports disappointed on margins or revenue, while Treasury prices were pressured by crude-oil strength and renewed rate-hike talk. In the background, investors also digested data showing stronger-than-expected productivity alongside cooling labor-cost growth, keeping the focus on how quickly inflation could moderate.
Key takeaways
- Index moves: The S&P 500 gained 0.17%, the Dow fell 0.03%, and the Nasdaq 100 declined 0.30%.
- Catalysts: Weak earnings-driven selloffs in software and memory chips weighed on tech and semiconductor peers.
- Data support: Better-than-expected jobless claims and stronger productivity helped offset some of the earnings pressure.
- Rates and oil: Higher crude oil and a reported willingness to consider further rate hikes pushed up yields and trimmed bond prices.
- Implication: Market direction is likely to hinge on the balance between earnings surprises and shifting expectations for the path of interest rates.
What drove the move
Sector performance was uneven. Software stocks came under pressure as Datadog dropped more than 15% after reporting Q2 adjusted gross margin below consensus. AppLovin slid about 19% after it missed analysts’ revenue expectations. In enterprise and adjacent tech, additional declines were reported across Atlassian, Workday, ServiceNow, and other software names, while some firms offset the weakness with results or guidance that beat expectations.
Memory-related equities also retreated. Shares in the memory supply chain fell after SanDisk forecast weaker-than-expected Q1 revenue, dragging sentiment for the group. The move also coincided with broader risk signals from overseas, including a roughly 4% decline in South Korea’s Kospi index, driven by losses in SK Hynix and Samsung Electronics.
Despite the tech pressure, several corporate updates provided support. Motorola Solutions, IonQ, Paycom Software, Ormat, and Parker-Hannifin rose after forecasting stronger-than-expected revenue. Additional market underpinning came from U.S. economic releases that pointed to labor-market resilience.
Market reaction and rates focus
Bond markets reflected sensitivity to both inflation expectations and the interest-rate outlook. September 10-year Treasury note prices fell, with the 10-year yield rising to 4.635%, after crude oil moved higher. The oil advance followed reporting that Yemen’s Houthi rebels targeted a Saudi oil tanker in the Gulf of Aden with a ballistic missile.
Rates traders also reacted to a Financial Times report that suggested Federal Reserve Chair Warsh would be willing to raise interest rates at the September FOMC meeting if inflation trends and expectations shift further toward tighter policy. That narrative added to the hawkish undertone created by data showing a smaller-than-expected increase in weekly jobless claims, which the market read as labor strength.
Still, Treasury losses were not steep, helped by the combination of stronger-than-expected nonfarm productivity and lower-than-forecast unit labor cost growth, which are typically viewed as less inflationary than feared. European government bond yields also moved higher, with the German bund and UK gilt yields rising after mixed European data, including a drop in Eurozone retail sales.
Earnings: winners and losers
Software and semiconductors were the main drag, but individual earnings results created a more selective market. Datadog led software declines after gross margin came in below consensus. AppLovin fell after revenue growth tracked below expectations, while HubSpot and other cloud and software names declined following revenue guidance that missed consensus.
On the upside, Paycom Software surged after raising its full-year revenue estimate above consensus. Unity Software gained after reporting Q2 revenue that beat expectations, and Motorola Solutions rose following Q2 net sales above consensus. Parker-Hannifin and Ormat also climbed after reporting stronger-than-expected results or raising revenue guidance.
Outside tech, the market’s reactions were similarly linked to guidance and revenue quality. Honeywell Aerospace fell after cutting its full-year organic growth estimate. Several additional companies were reported higher based on revenue beats or improved forecasts, while others declined when revenue and guidance fell short.
Bigger picture: macro and global signals
Economic data provided a counterbalance to the earnings-driven weakness. U.S. weekly initial jobless claims rose to 199,000, coming in below the expected 205,000. Quarterly results also landed relatively well on the inflation-relevant metrics: Q2 nonfarm productivity rose 1.4% versus an expected 0.6%, and Q2 unit labor costs increased 1.3% versus an expected 2.1%.
Crude oil remained a key variable for broader financial conditions. Oil prices moved higher after the reported tanker incident, while market participants monitored developments tied to the Strait of Hormuz. According to Iranian officials, any partial reopening would depend on U.S. actions regarding ports, and officials said an agreement would not automatically mean a full return to normal traffic.
Outside the U.S., overseas markets were mixed. The Euro Stoxx 50 hit a new all-time high, China’s Shanghai Composite climbed to a three-week high, and Japan’s Nikkei-225 closed lower.
With investors tracking the next wave of earnings and more rate-sensitive economic prints, attention is likely to remain on whether inflation expectations cool enough to reduce the odds of additional tightening. Next on the calendar, the key focus is the upcoming FOMC meeting dates and additional U.S. and European data that could further shift bond yields, alongside continued scrutiny of corporate guidance across software and semiconductors.
