NEW YORK: The S&P 500 ended higher on Thursday, springing back from early losses as investors concerned about AI stocks shifted into Eli Lilly, UnitedHealth and other healthcare and consumer stocks.
Several technology stocks fell, as investors scrutinised AI-related companies whose debt loads leave them vulnerable to rising interest rates.
Drugmaker Eli Lilly gained over 3%, UnitedHealth added 2.8% and Walmart rose 1.4% after rating upgrades by Deutsche Bank. Those three companies were heavy contributors to the S&P 500's gain for the session.
Nvidia dipped 1.8% after chip manufacturer TSMC struck a cautious note on 2027 despite reporting a sixth consecutive record quarterly profit on robust AI-driven demand.
Dell Technologies dropped 6.9% and Hewlett Packard Enterprise fell 7.1%, with both server makers adding to sharp losses in the prior session related to worries about AI companies exposed to higher borrowing costs.
The yield on 10-year Treasuries retreated but remained near multiyear highs as investors worried about inflation related to high oil prices.
"The cost to finance everything, whether it be a new single-family house or a giant data center, is going up, and that has implications for lots of stuff in the stock market," said Jed Ellerbroek, portfolio manager at Argent Capital Management in St. Louis. "The best performing stocks today are the non-cyclical, defensive businesses."
The Philadelphia semiconductor index fell 0.9%, down for a seventh straight session.
The S&P 500 climbed 0.33% to end the session at 7,744.06 points.
The Nasdaq gained 0.08% to 26,713.03 points, while the Dow Jones Industrial Average rallied 1.08% to 52,177.69 points.
Volume on US exchanges was heavy, with 20.7 billion shares traded, compared to an average of 17.6 billion shares over the previous 20 sessions.
Eight of the 11 S&P 500 sector indexes rose, led by healthcare, up 1.84%, followed by a 1.71% gain in materials.
After hitting a record high last week, the S&P 500 remains up about 13% in 2026, with most of that gain fuelled by AI-related stocks.
The S&P 500 is trading at about 19 times expected earnings, around its lowest level since 2023. The index's relatively low price-to-earnings valuation suggests investors are pricing in an eventual end to the massive earnings growth fueled by AI heavyweights, Ellerbroek said.
Data on Thursday 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 beyond energy products.
Hotter-than-expected consumer inflation data on Wednesday fuelled expectations of further interest-rate hikes by the US Federal Reserve, contributing to a Wall Street selloff.
"You've got a little rotation going on in the bigger names, but we've seen this before. It seems this crops up every couple of months and we have the AI concerns," said Joe Saluzzi, co-head of equity trading at Themis Trading in Chatham, New Jersey.
Interest rate traders are pricing in a 67% chance the Fed will raise interest rates by its December policy meeting, up from a 62% probability on Wednesday, according to CME's FedWatch tool.
Shares of Rocket Lab dropped 6.6% after the space company said the inaugural launch of its new, larger Neutron rocket was delayed until next year.
FMC tumbled over 30% after the agrichemicals company sharply cut its third-quarter outlook.
Advancing issues outnumbered falling ones within the S&P 500 by a 3.1-to-1 ratio.
The S&P 500 posted 24 new highs and no new lows; the Nasdaq recorded 61 new highs and 393 new lows.