Market Stumbles Again as Tech Weakness and AI Unwind Weigh on Major Indices

The stock market delivered another unsettled session today, marked by sharp sector divergences and continued pressure on tech and mega-cap names. By the closing bell, the S&P 500 (-0.8%), Nasdaq Composite (-1.2%), and DJIA (-1.1%) all finished lower for a second straight day, remaining beneath their 50-day moving averages.

Trading was choppy from the start. At various points, as many as nine S&P 500 sectors were in the red, while nine also traded in positive territory during different parts of the session—a sign of an increasingly fractured tape. Ultimately, only five sectors managed to close higher, but persistent weakness in consumer discretionary (-2.5%) and information technology (-1.7%) set the tone for the day.

Home Depot was a major drag after tumbling more than 6% on an earnings miss and reduced FY26 guidance, sparking a broader pullback in retail names. Amazon also weighed on the discretionary group after being downgraded to Neutral by Rothschild & Co.

The same firm also downgraded Microsoft, helping to spark early selling across the tech sector. Chipmakers were hit hardest, pushing the PHLX Semiconductor Index down 2.3% and extending its week-to-date decline past 9%. NVIDIA slid nearly 2% ahead of its closely watched earnings report tomorrow, while Advanced Micro Devices and Micron posted even steeper losses.

Alphabet attempted to buck the trend and briefly traded more than 1% higher following an upgrade from Loop Capital, but it ultimately slipped into the red by the close. Still, communication services (+0.1%) remained one of the few bright spots, helped by a strong rally in Warner Bros. Discovery and continued strength in Netflix after its 10-for-1 stock split.

Health care (+0.5%) again served as a defensive haven as investors rotated toward sectors with more attractive valuations in the wake of the AI unwind. Medtronic surged on a beat-and-raise report, while Merck climbed after boosting its dividend. Managed care names lagged, pressured by critical remarks from President Trump toward health insurers.

Energy (+0.6%) finished with the best sector performance as crude oil rebounded 1.3% to $60.68 per barrel. Meanwhile, small- and mid-cap stocks outperformed modestly, with the Russell 2000 and S&P Mid Cap 400 each rising 0.3%.

On the macro front, December rate-cut expectations received a small lift after the unexpected release of weekly jobless claims data during the government shutdown. The numbers showed slight increases in both initial and continuing claims, giving the market a mild dovish nudge. According to the CME FedWatch Tool, odds of a December rate cut rose to 51.1%, up from 42.4% yesterday.

Still, the broader theme of the day remained clear: rotation out of AI and mega-cap growth and into value pockets such as energy and health care. The Vanguard Mega Cap Growth ETF slid 1.4%, more than enough to pull the major indices lower despite a roughly balanced market breadth.

With NVIDIA set to report earnings tomorrow, the AI trade continues to sputter. Even headlines touting a new partnership between NVIDIA, Microsoft, and Anthropic, along with news that the U.S. is working to advance chip sales to Saudi Arabia, failed to entice buyers back into the space. Investors appear to be waiting for fresh conviction—and tomorrow’s results may provide the next major catalyst.

Our FTinvest 11 model portfolio bounced back convincingly today, breaking a short streak of weakness and reclaiming positive momentum with a solid 1% gain. The index closed at 866.89, marking a strong session that stood in contrast to the broader market’s continued volatility.

From the opening bell, FTinvest 11 showed a steadier tone than the benchmark indices, which remained pressured by ongoing rotation out of mega-cap tech and AI-related names. While the broader market wrestled with sector-level crosscurrents, FTinvest 11 benefited from more balanced participation across its components. A handful of holdings that had come under pressure earlier in the week helped lead today’s recovery, offsetting pockets of mild weakness elsewhere and lifting the index decisively into the green.

Throughout the session, the portfolio remained comfortably in positive territory, showing none of the midday reversals that characterized the broader indices. Instead, FTinvest 11 steadily built on its early gains, reflecting a calm, orderly rebound that pointed to renewed investor confidence after several days of choppy behavior in high-beta corners of the market.

Today’s performance sets the stage for a more stable close to the trading week, with the index now positioned well heading into Friday’s session.