Tech Sector Falls -1.1% as Rising Yields Pressure Growth

On Tuesday, September 1, the Information Technology sector faced broad selling pressure as only 15.3% of its member companies advanced. The cap-weighted sector fell -1.1%, while the equal-weighted sector suffered a larger decline of -2.1%. The Technology Select Sector SPDR Fund (XLK), an exchange-traded fund holding $115.4 billion in net assets, declined -1.5% to close at $183.68. The pullback came as higher crude prices and a global bond rout sparked inflation concerns, with reduced hopes for a near-term Iran resolution weighing on market sentiment.

The gap between the cap-weighted decline and the steeper equal-weighted loss highlighted where the damage fell. The largest technology constituents held up comparatively well, buffering the cap-weighted sector against the broader weakness that pulled the equal-weighted group lower. Leading the sector lower was Cadence Design Systems Inc (-7.6%), though our sources show no company-specific driver behind the decline. Advancing names were rare throughout the day, with HP Inc (+4.4%) and Amphenol Corporation (+2.9%) standing out as few bright spots in an otherwise defensive session.

Technology was a primary driver of broader market weakness on Tuesday, September 1, an unsupportive session where only 4 of the 11 sectors rose. Rising energy prices intensified rate worries on Wall Street as higher oil prices and climbing bond yields pressured Big Tech stocks. Even with Tuesday's decline, XLK remains up +3.2% over the past month, maintaining its recent upward trajectory despite the bond market volatility.

At an expense ratio of 0.08%, Technology Select Sector SPDR Fund holds 54.3% of its graded weight in companies graded A or B relative to their industry peers. Companies graded A or B have stronger fundamentals, and historically they have carried a lower risk of large drawdowns than companies graded D or E. That quality concentration underpins the portfolio across its $115.4 billion asset base, providing balance even during sessions when rate pressure narrows participation across the sector.