More of the same…higher oil and interest rates, drive market lower

The stock market moved lower again this week, with the S&P 500 (-2.1%) and Nasdaq (-3.2%) leading the decline, while the Dow Jones (-0.9%) held up relatively better. The week was defined by sharp rotations, weakness in the megacaps, and continued volatility in oil, driven by geopolitical developments.

The week began with a broad rally driven by hopes of a potential pause in hostilities between the U.S. and Iran. All eleven sectors advanced on Monday, and the S&P 500 briefly reclaimed their 200-day moving averages. However, that optimism proved fleeting, as conflicting reports around negotiations quickly reintroduced uncertainty. From there, oil resumed its volatile swings, and Treasury yields moved higher overall, creating a difficult backdrop for equities. While there were intermittent bouts of strength tied to dips in oil prices, each rebound attempt was promptly sold.

The Nasdaq underperformed sharply, weighed down by significant losses in the communication services (-7.2%) and technology (-3.5%) sectors. The communications sector was negatively impacted by a court ruling that went against Meta and Alphabet. Weakness in megacaps was a persistent drag, with the Vanguard Mega Cap Growth ETF falling 4.1% and the iShares Expanded Tech-Software ETF dropping 7.4%.

In contrast, smaller-cap stocks showed relative resilience for much of the week, with the Russell 2000 (+0.5%) and S&P Mid Cap 400 (+0.4%) managing gains. The energy sector (+6.2%) led all gainers as oil prices ultimately pushed back toward the $100 per barrel mark by week’s end, despite early volatility. The materials sector (+4.2%) also posted strong gains, supported by strength in chemicals and metals amid ongoing supply concerns tied to geopolitical risks.