Late Selloff Caps Weak September as Narrow Tech Leadership Masks Broader Market Strain

The major averages ended Wednesday on a decidedly weaker note as a sharp final-hour selloff erased much of the session’s earlier strength, putting an exclamation point on a September defined by increasingly narrow market leadership. The S&P 500 declined 0.3% and the Dow Jones Industrial Average fell 0.9%, with both finishing near their session lows. The Nasdaq Composite managed to retain a 0.2% gain but surrendered most of an earlier advance of roughly 1%.

The reversal left the S&P 500 down 0.5% for September and the Dow down 4.3%, while the Nasdaq Composite still finished the month with a 1.9% gain. That divergence captured one of September’s defining themes: persistent strength in mega-cap growth, technology, and AI-related stocks contrasted with considerably weaker performance across much of the broader market.

That pattern was evident again for much of Wednesday’s session. The Vanguard Mega Cap Growth ETF gained 0.4% and finished September up 3.2%, while information technology (+0.6%) led the S&P 500 sector standings and ended the month with a 4.4% advance.

Software stocks were particularly strong, with the iShares Expanded Tech-Software Sector ETF (IGV) gaining 1.2%. Semiconductor stocks were little changed on Wednesday, leaving the PHLX Semiconductor Index flat, but the group remained one of September’s standout performers with a 9.5% monthly gain.

Micron (MU 1065.11, +0.03, +0.00%) will put that semiconductor strength back into focus when it reports earnings after Wednesday’s close. Investors will be watching closely for indications that strong memory pricing and AI-related demand can continue supporting growth as the company increases capital spending.

Several other technology stocks experienced pronounced moves. Hewlett Packard Enterprise (HPE 63.89, +2.40, +3.90%) outperformed after raising its Networking outlook and increasing its expected Juniper cost synergies ahead of its Networking Investor Day.

Jabil (JBL 286.76, -32.08, -10.06%) moved sharply in the opposite direction, plunging more than 10% despite reporting better-than-expected results and providing an upbeat outlook. Elevated expectations surrounding the company’s AI-driven growth prospects appeared to raise the bar considerably, limiting investors’ response to otherwise solid results.

Communication services finished unchanged after surrendering a sizable earlier gain. Meta Platforms (META 725.18, -13.61, -1.84%) weakened sharply into the close, while Alphabet (GOOG 340.74, +3.42, +1.01%) gave back part of its earlier advance. Despite Wednesday’s reversal, communication services still gained 4.3% in September.

Consumer discretionary (+0.1%) was the only other S&P 500 sector to finish above its flat line, supported in part by Amazon (AMZN 249.15, +2.48, +1.01%).

Weakness became considerably more pronounced elsewhere as the session progressed. Consumer staples (-1.7%) finished at the bottom of the sector standings, followed by health care (-1.4%), industrials (-1.3%), and financials (-1.2%). Moderna (MRNA 192.57, -10.89, -5.35%) was a notable health care laggard after Citigroup downgraded the stock to Sell from Neutral.

Market breadth deteriorated substantially during the afternoon. Declining stocks ultimately outpaced advancers by roughly 9-to-5 on the NYSE and by a narrower margin on the Nasdaq. The weakness also extended beyond large caps, with the Russell 2000 falling 0.3% and the S&P MidCap 400 declining 0.5%.

The monthly figures highlighted an even more dramatic divergence. The Russell 2000 lost 5.3% in September, while the S&P MidCap 400 declined 4.3%. Those losses stood in sharp contrast to the monthly gains for mega-cap growth, technology, and semiconductors, underscoring just how concentrated market leadership became during September.

Stocks initially received support from slightly cooler-than-expected inflation data. The August PCE Price Index increased 0.3% month over month, below the Briefing.com consensus estimate of 0.4%, while the core PCE Price Index rose 0.2%, compared with expectations for a 0.3% increase.

The softer monthly readings increased expectations that the Federal Reserve could leave interest rates unchanged at its October meeting. However, the initial relief in the Treasury market proved short-lived. Investors quickly refocused on the fact that year-over-year PCE inflation remained at 3.4%, with core PCE at 3.0%—both still well above the Fed’s 2% inflation target.

Treasury yields consequently staged a sharp reversal. Yields initially moved lower immediately following the 8:30 a.m. ET inflation report before climbing back as the session progressed. The 2-year Treasury yield finished unchanged at 4.89%, leaving it up 55 basis points for September. The 10-year yield rose four basis points to 5.30% and ended the month 56 basis points higher.

The persistence of elevated Treasury yields remained an important obstacle for the broader equity market. While the largest technology and AI-related companies have demonstrated considerable resilience in the face of rising rates, smaller companies and more rate-sensitive sectors have struggled significantly as borrowing costs increased.

Crude oil also moved higher following Tuesday’s sharp decline. WTI futures rose $1.28, or 1.4%, to settle at $90.54 per barrel. Reports indicated that crude exports through the Strait of Hormuz had returned to pre-war levels, although flows of refined petroleum products remained constrained.

Ultimately, the final session of the third quarter captured many of the trends that defined September. Mega-cap growth, technology, software, and semiconductor stocks generated substantial gains, but their strength increasingly masked deterioration across smaller companies and many economically sensitive areas of the market.

Wednesday’s late selloff only sharpened that contrast. The Nasdaq managed to finish September with a 1.9% gain, supported by powerful AI and technology leadership, while the S&P 500, Dow Jones Industrial Average, Russell 2000, and S&P MidCap 400 all ended the month in negative territory.

With the 10-year Treasury yield ending September at 5.30% after climbing 56 basis points during the month, the interest-rate backdrop remains a critical challenge heading into the fourth quarter. The central question for equities is whether technology and AI-related leadership can broaden into the rest of the market—or whether persistent weakness in small caps, cyclicals, and rate-sensitive stocks will eventually become a more significant constraint on the major indexes.

Our FTinvest 11 model portfolio declined 1.06% to close at 880.69, extending its losing streak to a fifth consecutive session and setting another new low for the current correction. The portfolio ended September approximately 19.7% below its all-time closing high of 1,096.33, placing it close to the 20% drawdown mark and well below both the 1,000 and 900 levels.

FTinvest 11 is now down approximately 5.12% year-to-date. September was a particularly difficult month: the portfolio entered the month at 1,008.00 and finished at 880.69, a decline of approximately 12.6% from the August 31 close. The month included a sharp move into correction territory, several short-lived rebounds, and renewed selling pressure into month-end. After reaching an all-time high in July and carrying a double-digit year-to-date gain through much of the summer, FTInvest 11 closes the third quarter in negative territory for 2026 and near the deepest point of its current drawdown.