U.S. equities finished mostly higher on Thursday, with the Dow Jones Industrial Average climbing 556 points, or 1.08%, as market participants rotated away from artificial intelligence plays and into defensive corners of the market. The S&P 500 added 0.33%, while the Nasdaq Composite eked out a gain of 0.08% as weakness in chipmakers capped the technology-heavy index.
The session's leadership shift came against a backdrop of stubbornly high inflation and elevated borrowing costs. September producer prices rose 1.3% month over month and 6.3% year over year, the sharpest annual wholesale inflation reading since December 2022. The report landed a day after consumer price data also came in hotter than expected, reinforcing fears that the Federal Reserve may need to tighten policy further before year-end.
Defensive names lead the advance
Healthcare and consumer staples drew the bulk of buying interest. Eli Lilly, UnitedHealth and Walmart all moved higher after Deutsche Bank upgrades, with Walmart up nearly 2%. Nike jumped more than 5%. The gains underscored a preference for companies whose earnings are less sensitive to the cost of capital and less exposed to the massive infrastructure spending tied to AI.
According to CME FedWatch, traders now assign a 67% probability to a Fed rate increase by the December meeting, up from 62% on Wednesday. The 10-year Treasury yield, a key benchmark for borrowing costs across the economy, remained near multiyear highs even as it pulled back during the session.
Semiconductors under pressure
Technology shares struggled as investors scrutinized AI companies carrying heavy debt loads and questioned whether the sector's growth trajectory is sustainable. The Philadelphia Semiconductor Index fell for a seventh straight session. Broadcom and Nvidia declined after Taiwan Semiconductor Manufacturing Company cautioned about its 2027 outlook, even as the chipmaker posted a sixth consecutive quarter of record profits driven by AI demand.
Dell Technologies and Hewlett Packard Enterprise remained under pressure following the prior session's losses tied to financing cost concerns. Memory-focused names faced additional headwinds from worries about a potential supply glut and intensifying competition from China. Seagate Technology, Western Digital and SK Hynix extended their weekly declines.
Anthropic's latest revenue figures added to questions about the pace of AI adoption. The Claude developer generated $16.8 billion in third-quarter revenue, but the sequential increase was slower than in prior periods. Not every AI-linked stock fell: CoreWeave gained about 3%, recovering from a more than 15% drop the previous session, while Micron Technology rebounded from earlier losses to close nearly 1% higher.
Valuation and rotation dynamics
The S&P 500 remains up roughly 13% in 2026 after hitting a record high last week, with much of that advance powered by AI-related names. However, the index was trading at around 19 times expected earnings, its lowest valuation level since 2023, according to the supplied report. The rotation into defensives suggests investors are reassessing the risk-reward of expensive AI infrastructure investments in a higher-for-longer rate environment.
Elsewhere, Rocket Lab shares fell after the company delayed the first launch of its larger Neutron rocket until next year. FMC also tumbled after sharply reducing its third-quarter outlook.
This article is for informational purposes only and does not constitute financial advice.
