S&P 500 Falls 1.21% as AI Selloff Triggers Defensive Rotation; Equal-Weight Index Gains 0.77%

U.S. stocks fell Thursday as AI-related selling spread beyond technology into power equipment, energy and industrials, with investors rotating into defensive sectors rather than exiting equities. The Nasdaq dropped 2.6%, its steepest one-day loss in over four months, while the S&P 500 fell 1.21%, its worst showing since July. The Dow was roughly flat and the S&P 500 equal-weight index rose 0.77%. Concentration drove the divergence: the top 10 S&P 500 constituents account for about 40% of index market value. GE Vernova and Bloom Energy were among the index's biggest decliners, while Caterpillar also fell sharply. The Philadelphia Semiconductor Index plunged 6.72%, with every component lower, and has dropped more than 26% from its June high, entering bear territory. Defensive names drew buyers. Consumer staples led S&P 500 sectors, with General Mills up 8.01% and Campbell's up 8.69%. Treasuries also strengthened. Bespoke said the breadth divergence was the second-largest since at least 1990, behind only the January 2025 session when DeepSeek concerns hit AI stocks. BTIG's Jonathan Krinsky noted that more than 30% of trading days in 2026 have seen the index move opposite most constituents, the highest share since 1996.