US STOCKS-S&P 500, Nasdaq pare declines as AI rout teeters; healthcare, staples gain

The S&P 500 recouped most of its early losses to trade near flat on Thursday as a selloff in AI stocks eased and investors rotated into defensive sectors as fresh data pointed to building US price pressures. The Nasdaq ‌neared a one-month low earlier in the session as tech stocks lost ground after TSMC struck a cautious note on 2027. Reports of a 45% sequential jump in Anthropic's quarterly revenue offered little reprieve.

By the afternoon, most stocks recovered from declines on Thursday. Cloud computing giant Oracle reversed course to gain 2.1%. The S&P 500 information technology sector lost 1.1%, with gains in software stocks ‌and tech heavyweights such as Microsoft cushioning the fall.

Chipmaker Nvidia was down 1.9% and Advanced Micro Devices lost 4%. The broader Philadelphia semiconductor index fell 2.4%, putting it on track for ‌a seventh straight decline and nearly $2 trillion in combined market-value losses in the period.

On the flip side, traditionally defensive sectors continued to rise, with healthcare and consumer staples adding 2.6% and 1%, respectively. Drugmaker Eli Lilly gained 5.2%, UnitedHealth was up 4%, while Walmart rose 2.3% after a rating upgrade by Deutsche Bank.

"That is emblematic of a defensive rotation. It's because of the worry that maybe some sort of a debt crisis is emerging," said Sam Stovall, chief ⁠investment strategist ​at CFRA Research. Still, heavily indebted data-center operator ⁠CoreWeave lost 1.3% after a 15% drop on Wednesday. Its bonds also fell, pushing yields to record highs.

"There has been growing concern about the cash flow reality underlying the AI narrative and has been building at a ⁠time that rates have been rising and (interest) rate volatility is increasing," said Jordan Rizzuto, CIO at GammaRoad Capital Partners. "To the degree that rate volatility persists, we would expect credit related pressures to continue to mount for ​such (indebted) companies."

At 12:44 p.m. ET, the Dow Jones Industrial Average rose 457.99 points, or 0.89%, to 52,078.61, the S&P 500 gained 3.74 points, or 0.05%, to 7,722.68, ⁠and the Nasdaq Composite fell 126.38 points, or 0.47%, to 26,566.48. The CBOE Volatility Index, considered Wall Street's fear gauge, hit a two-week high on Thursday and was swinging between gains and losses.

Data showed US producer prices increased by the ⁠most ​in 4-1/2 years in September amid rising goods and services costs, the latest indication of inflation broadening out beyond energy products. Markets will now scrutinize Fed Chair Kevin Warsh's speech before the International Monetary Fund Annual Meeting.

Hotter-than-expected consumer inflation dataon Wednesday had fueled expectations of further interest-rate hikes from the US Federal Reserve, after which the S&P 500 and the Nasdaq marked their ⁠biggest one-day fall since July. Shares of Rocket Lab dropped 10.9% after the space company said the inaugural launch of its new, larger Neutron rocket was delayed until next year.

FMC ⁠slid over 31% after the agrichemicals company sharply ⁠cut its third-quarter outlook, which includes a $625 million-$675 million hit from commercial actions. Advancing issues outnumbered decliners by a 2.34-to-1 ratio on the NYSE and by a 1.52-to-1 ratio on the Nasdaq.

The S&P 500 posted 23 new 52-week highs and no new lows, while the Nasdaq ‌Composite recorded 51 new highs ‌and 351 new lows.