The Dow Jones Industrial Average held steady near the 51,700 level Tuesday morning, while the Nasdaq and S&P 500 suffered deeper losses as a broad selloff in artificial intelligence and semiconductor stocks weighed on the broader market. The Dow was last at 51,703.51, down just 9.20 points, according to Reuters data, trading in a narrow range of 51,301.77 to 51,809.84.
Tech and AI Stocks Lead the Decline
The selloff was concentrated in technology and AI-linked names, with the Philadelphia SE Semiconductor Index plunging 7.3%, Reuters reported. Major decliners included Nvidia, Alphabet, Intel, Marvell Technology, and Advanced Micro Devices, which dragged down the Nasdaq and S&P 500. The Nasdaq fell 1.34%, while the S&P 500 dropped 0.92%, according to WSJ data. The Dow's relatively smaller exposure to high-flying AI trades helped it outperform its tech-heavy peers.
"When everybody owns the same stocks, the exit door becomes very small very quickly," said Nigel Green, CEO of deVere Group, in a Reuters interview. The risk-off mood followed a three-day slide that erased $600 billion from SpaceX's market value, shaking confidence in expensive growth stocks and AI bets funded with debt.
Dow's Price-Weighted Structure Provides Support
The Dow's price-weighted methodology played a role in its relative stability. Higher-priced stocks carry more weight in the average, so gains in shares of IBM, Sherwin-Williams, and Microsoft briefly pushed the Dow into positive territory about an hour after the open, according to MarketWatch. However, Caterpillar fell about 4%, becoming the main drag on the index. Caterpillar and Nvidia were named as the biggest weights on the Dow in morning action, as the index slipped around 175 points.
Despite the bounce, the Dow lagged the recovery seen in other benchmarks and did not fully shake off the selling pressure. Still, the blue-chip index fared better than the tech-heavy averages.
Fed Rate Hike Bets and PCE Inflation Report in Focus
Traders are closely monitoring Federal Reserve rate-hike odds and looking ahead to Thursday's PCE inflation report, the Fed's preferred inflation gauge. According to the Associated Press, traders now see an 85% chance the Fed will raise rates this year, up from 60% last week. The PCE report is expected to show prices still running hot, which could reinforce expectations for tighter monetary policy. Higher interest rates tend to weigh on stocks by making borrowing more expensive and reducing the present value of future earnings.
Some Wall Street firms remain bullish. Barclays and Stifel raised their year-end S&P 500 targets to 7,800, citing firmer earnings. Barclays' Venu Krishna noted that "the equity bull case remains intact," with more weight now on earnings and AI capital expenditures as Fed support slows.
The Dow's recent calm could be short-lived. The central question for the market is whether the AI trade is slowing down smoothly or starting to push money out of riskier assets. Not all U.S. stocks are getting the same treatment from investors, but the market's focus remains on the sustainability of the AI-driven rally.
