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This holiday-shortened week got started on a softer note following last week's big gains. The Russell 2000 paced index losses, declining 2.1%, while the Nasdaq settled with a 0.1% loss. The S&P 500 maintained a position above 4,500 for most of the session until a sharp move lower in the late afternoon led the index to close just a whisker shy of that level.

Relative strength in mega cap stocks, which reflected an overall risk-off vibe in the market, helped limit losses for the major indices. Tesla (TSLA 256.49, +11.48, +4.7%) was a standout in that regard, jumping almost 5.0%.

Today's selling was fueled by a jump in market rates, along with global growth concerns that were stoked by a batch of disappointing PMI readings from overseas and rising oil prices. The 2-yr note yield rose eight basis points to 4.96% and the 10-yr note yield rose ten basis points to 4.27%.

The sharp increase in oil prices contributed to today's lackluster showing, prompting worries about inflation expectations and consumer spending pressures. WTI crude oil futures rose 1.2% to $86.55/bbl following news that Saudi Arabia and Russia are planning to extend their voluntary oil production cuts of 1 million barrels per day and 300,000 barrels per day, respectively, through the end of 2023.

The move in oil prices propelled the S&P 500 energy sector (+0.5%) to the top of the leaderboard followed by information technology (+0.4%). Nine of the 11 S&P 500 sectors logged a decline, led by materials (-1.8%) and industrials (-1.7%).

Homebuilder stocks were also noticeably weak, reacting to concerns about rising mortgage rates. The SPDR S&P Homebuilder ETF (XHB) fell 3.9% and the iShares U.S. Home Construction ETF (ITB) fell 4.6%. Toll Brothers (TOL 79.22, -4.61, -5.5%) and Pulte Group (PHM 77.89, -4.74, -5.7%) were among the top laggards from the space.

Market participants digested some positive news today, too. Specifically, Goldman Sachs said it now sees only a 15% chance of the U.S. experiencing a recession versus 20% previously and Fed Governor Waller (FOMC voter) said there was nothing in the data last week that meant the Fed needs to do something anytime soon, meaning the Fed can sit tight with its current policy rate.

Today's economic data was limited to factory orders for July, which declined 2.1% month-over-month (consensus -2.4%) following an unrevised 2.3% increase in June. Excluding transportation, factory orders increased 0.8% month-over-month on the heels of a 0.3% increase in June. Shipments of manufactured goods rose 0.5% month-over-month after increasing 0.2% in June.

Wednesday's economic calendar includes: