S&P 500 falls 1.2% as telecom, consumer discretionary lead selloff

The S&P 500 dropped 1.2% as a rout in telecom and consumer discretionary shares overshadowed energy gains fueled by oil above $98.

The S&P 500 fell 1.2% on Thursday as a broad-based selloff in telecom and consumer discretionary stocks offset gains in energy and industrial shares.

"Escalating tensions in the Gulf and disappointing tech earnings have created a dual shock to risk appetite," analysts at Deutsche Bank said in a note.

The telecom sector plunged 5%, the steepest decline among the 11 GICS groups, while consumer discretionary dropped 4.9%. The technology sector fell 1.3%, with the semiconductor index down 1.1% and the bank index losing 1.1%. The Nasdaq 100 slid 1.9% and the Dow Jones Industrial Average fell 1%. In contrast, energy rose 0.4% as Brent crude topped $98 a barrel, and industrials gained 1.5%.

The selloff reflects a rotation out of growth and consumer-facing names into value and defensive sectors as investors weigh the dual headwinds of geopolitical risk and elevated inflation expectations. The 10-year Treasury yield held near a two-month high of 4.659%, while the dollar eased, with the DXY index down 0.1% to 101.009.

The moves came as American forces struck Iran for a 12th consecutive day, and Houthi rebels said they hit two Saudi oil tankers in the Red Sea, according to the Wall Street Journal. Brent crude climbed 4.6% to $98.39 a barrel, while WTI futures rose 3.4% to $89.75. Traffic through the Strait of Hormuz has fallen sharply from June levels, with some vessels rerouting to avoid the Red Sea, Deutsche Bank analysts noted.

In after-hours trading, Alphabet fell 3.1% and Tesla dropped 4.6% after the pair reported earnings, with investors focused on the scale of their artificial intelligence spending. The capital expenditure outlook boosted some Asian chip makers, with Hong Kong's Hang Seng Index rising 1.1% and South Korea's Kospi jumping 4.4%. European indexes fell, with the Stoxx 600 down 0.7%, as STMicroelectronics tumbled more than 15% after its earnings.

Gold fell 1% to $4,110.30 a troy ounce after reaching a two-week high on Wednesday, as rising oil prices fueled expectations of higher interest rates. The European Central Bank is set to announce its latest policy decision later Thursday, with investors focused on President Christine Lagarde's press conference for clues on the September meeting.

This article is for informational purposes only and does not constitute investment advice.