S&P 500 Slips as Financials Fall, While AI Stocks Drive Nasdaq Higher

NEW YORK – The S&P 500 ended Wednesday’s session in the red, weighed down by declines in major financial firms such as JPMorgan and Blackstone. Meanwhile, gains in AI-focused stocks like Nvidia and Alphabet helped lift the Nasdaq, reflecting a shift in investor interest back toward technology.

Earlier in the day, both the S&P 500 and the Dow Jones Industrial Average had touched record intraday highs before retreating. A key catalyst for the pullback was President Donald Trump's announcement of plans to bar Wall Street firms from purchasing single-family homes, a move aimed at lowering housing prices. That policy sent shares of real estate investment companies tumbling.

Blackstone and Apollo Global Management dropped more than 5%, dragging the S&P 500 financial sector index down 1.4%. American Homes 4 Rent also lost 4.3%, while real estate platform Zillow bucked the trend, climbing over 2%.

JPMorgan Chase slipped 2.3% after Wolfe Research downgraded the stock from "outperform" to "peer perform."

Defense contractors also came under pressure. Northrop Grumman fell 5.5% and Lockheed Martin dropped 4.8% after Trump stated that defense firms would be barred from issuing dividends or conducting share buybacks until they address production issues related to military equipment. Trump did not name specific companies in his statement.

In contrast, tech giants saw renewed buying interest. Nvidia and Microsoft both gained around 1%, while Alphabet advanced more than 2% as investors returned to AI stocks after a brief period of concern over high valuations. Reflecting this bullish sentiment, AI company Anthropic is reportedly seeking a multi-billion-dollar funding round that could value the maker of Claude chatbot at $350 billion—placing it ahead of major firms like AMD, Chevron, and Wells Fargo in valuation.

“Investors are entering 2026 much like they did last year—loading up on tech and not looking back,” said Jake Dollarhide, CEO of Longbow Asset Management. “Rumors that the AI rally was over turned out to be false.”

As fourth-quarter earnings season approaches, valuations on Wall Street remain elevated. The S&P 500 is currently trading at about 22 times projected earnings, down from 23 in November but still higher than the five-year average of 19, according to LSEG.

Economic data released Wednesday showed a sharper-than-expected drop in U.S. job openings for November, following a modest rise in October. Separately, the ADP report indicated slower-than-anticipated growth in private-sector employment for December.

Although these figures mark a return to regularly scheduled economic releases following the government shutdown, they did little to alter expectations that the Federal Reserve will begin cutting rates, with markets now looking ahead to Friday’s official jobs report.

Geopolitical risks also remained on investors’ radar. The U.S. recently seized a Russian-flagged oil tanker tied to Venezuela, part of Trump’s strategy to control regional energy flows and pressure Venezuela’s government to align more closely with Washington.

In addition, the White House said Trump is reviewing military options as part of ongoing discussions around acquiring Greenland.

Elsewhere, memory and storage stocks gave back recent gains. Western Digital fell nearly 9%, and Seagate Technology dropped 6.7%. Solar panel maker First Solar tumbled 10% after Jefferies downgraded the stock from "buy" to "hold."

Declining stocks significantly outnumbered advancers within the S&P 500 by a ratio of 3.4 to 1.

The S&P 500 recorded 28 new highs and 17 new lows, while the Nasdaq saw 106 new highs and 58 new lows.

Trading volume was above average, with 17.4 billion shares exchanged across U.S. exchanges—higher than the 20-day average of 16.2 billion. — Reuters