Consumer Staples ETFs Surge at Record Pace as Investors Rotate Out of AI Trades

Walmart (WMT) has risen 16.2% in October, on pace for its best month since 1999, as investors rotate heavily out of AI-linked technology stocks into defensive consumer staples. The Consumer Staples Select Sector SPDR Fund (XLP) is up 11.3% this month, its strongest performance since its December 1998 inception, while the Technology Select Sector SPDR Fund (XLK) has fallen 6.9% and the iShares Semiconductor ETF (SOXX) has dropped more than 15%. SPY is roughly flat. Staples are outperforming the S&P 500 by about 11 percentage points this month, a gap matched only once in the fund's 27-year history, in April 2022. Meta Platforms (META) fell about 8% on Thursday on AI spending concerns, dragging XLK down 3.4% while XLP gained 2.7%. The 10-year Treasury yield fell about 17 basis points to 4.95%. Procter & Gamble (PG) has gained 14.6% in October, its best month since October 1998, after reporting 1% core earnings growth to $2 per share on $23.28 billion in net sales, up 4%. P&G flagged about $1.4 billion in after-tax commodity cost headwinds this fiscal year. BofA strategists describe the AI selloff as positioning-driven turbulence rather than evidence of fundamental weakness, though they note defensive sectors now screen with elevated bubble-risk readings. Polymarket traders assign a 7.5% probability of a U.S. recession before the end of 2026.