Software Stocks Lag Chips in August, but September Risks Rising
Software equities underperformed semiconductor stocks in August, but historical patterns suggest a tougher September ahead. Recent geopolitical tensions in the Middle East and rising oil prices have triggered risk-off sentiment, with analysts warning that weak jobs data may be necessary to unlock interest-rate relief.
Key points
- Software stocks lagged chip stocks in August, though the S&P 500 rose 2.6% and the Nasdaq Composite gained 3.9% for the month.
- The Dow Jones Industrial Average posted its fifth straight monthly advance, climbing 1.3% in August.
- Markets ended August on a sour note as the U.S. struck targets in Iran, causing oil prices to rise and pushing interest rates higher.
- Goldman Sachs noted signs of nervousness in market indicators, with investors adjusting portfolio risk allocations.
- September is historically a poor month for stocks, compounded by a dense economic calendar including manufacturing data and the August jobs report.
- Interactive Brokers economist Jose Torres stated that Wall Street needs weak labor statistics to justify a balanced approach at the Federal Reserve and loosen financial conditions.
Background
Our archive from September 1, 2026, noted that markets were already edging toward a cautious start after August gains, with sentiment cooling due to oil price spikes following U.S. strikes on Iran. That earlier coverage highlighted the same geopolitical tensions and the heavy economic calendar expected to keep investors on their toes, setting the stage for the current risk-off environment.
How outlets are covering it
Yahoo Finance emphasizes the historical seasonality of September, suggesting that the underperformance of software stocks in August may worsen as the month progresses. CNBC focuses on the immediate geopolitical catalysts, specifically the U.S. strikes on Iran’s Larak Island and subsequent missile exchanges, which drove oil prices higher and caused the Dow to drop more than 370 points in late August trading. While Yahoo Finance highlights the structural weakness of software versus chips, CNBC underscores the acute risk aversion triggered by Middle East conflicts and the potential for further strikes in the Strait of Hormuz.
Why it matters
The shift from software to chip leadership in August, combined with September’s historical weakness and geopolitical instability, signals a potential rotation or broad market pullback. Investors are closely watching the August jobs report, with economists expecting 53,000 new jobs, as weaker data could trigger bond buying and pressure the Federal Reserve to ease monetary policy, thereby influencing interest rates and equity valuations.
What to watch
Investors will monitor manufacturing and services sector data due Tuesday and Wednesday, followed by the August jobs report on Friday. Market sentiment will likely remain sensitive to oil prices and Middle East developments, with traders watching for signs of further U.S. strikes or diplomatic de-escalation. The performance of the Dow, S&P 500, and Nasdaq in the coming weeks will depend on whether labor data supports a dovish shift at the Federal Reserve.
- Software stocks crushed chips in August. History says September gets tougher: Chart of the Day Yahoo Finance
- Dow futures fall 300 points to kick off September as global bond yields rise: Live updates CNBC
- There Was No Beating Moderna in August. These Are the Best and Worst S&P 500 Stocks for the Month. Barron's
- Stock Market Enjoys August Gains—Thanks to Unusual Winners WSJ
- 23 best-performing stocks of August, as the software industry continues its recovery MarketWatch
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