U.S. Stock Market - S&P 500 Closes Higher as Traders Shift Focus from AI to Healthcare

Updated after market close

Noel Randewich/Sruthi Shankar

Reuters, October 15 - On Thursday, the S&P 500 closed higher, rebounding from early losses as investors concerned about artificial intelligence (AI) stocks rotated into Eli Lilly, UnitedHealth Group, and other healthcare and consumer sector stocks.

Some tech stocks fell as investors are closely watching AI-related companies that are more exposed to rising interest rates due to higher debt loads.

Eli Lilly LLY.N, UnitedHealth Group UNH.N, and Walmart WMT.N all rebounded after Deutsche Bank upgraded their ratings.

Broadcom (AVGO.O) and Nvidia (NVDA.O) shares declined after chipmaker TSMC (2330.TW), despite posting a record profit for the sixth straight quarter driven by strong AI demand, maintained a cautious outlook for 2027 (link).

Dell Technologies DELL.N and Hewlett Packard Enterprise HPE.N extended their losses after both stocks plunged in the previous session over worries that AI companies will face higher borrowing costs.

Although the 10-year Treasury yield eased slightly, it remained near multi-year highs as investors worried that high oil prices could stoke inflation.

"Whether it's new single-family homes or massive data centers, the financing cost for every project is rising, and that's going to impact many areas of the stock market," said Jed Ellerbroek, portfolio manager at Argent Capital Management in St. Louis. "Today's best-performing stocks are non-cyclical, defensive companies."

The Philadelphia Semiconductor Index .SOX fell for the seventh consecutive trading day.

According to preliminary data, the S&P 500 Index .SPX rose 24.94 points, or 0.32%, to close at 4,774.07; the Nasdaq Composite Index .IXIC gained 18.37 points, or 0.07%, to 14,969.65. The Dow Jones Industrial Average .DJI increased by 559.45 points, or 1.08%, to 34,098.24.

After setting an all-time high last week, the S&P 500 remains up about 13% year-to-date in 2023, with most of the gains driven by AI-related stocks.

The S&P 500's current price-to-earnings ratio is about 19, close to the lowest level since 2023. Ellerbroek said the Index's relatively low P/E valuation suggests that investors have priced in the eventual end to massive earnings growth driven by AI giants.

Data released Thursday showed that US producer prices in September (link) recorded the biggest increase in four and a half years, driven by rising costs of goods and services, further indicating that inflation has spread beyond the energy sector.

Consumer inflation data released Wednesday (link) was higher than expected, fueling expectations for further rate hikes by the Federal Reserve and triggering a sell-off on Wall Street.

"There has definitely been some rotation among the mega-cap stocks, but we've seen this before. It seems like it happens every few months, and we’re also facing concerns about AI," said Joe Saluzzi, co-head of equity trading at Themis Trading in Chatham, New Jersey.

According to CME’s FedWatch tool, interest rate traders now see a 67% probability that the Federal Reserve will raise rates at its December policy meeting, up from 62% on Wednesday.

Space company Rocket Lab (link) RKLB.O announced that the maiden launch of its new, larger Neutron rocket will be delayed until next year, sending its share price lower.

Agricultural chemical company FMC FMC.N saw its stock slump sharply after it significantly cut (link) its Q3 earnings outlook.

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