The U.S. stock market is splitting in two. On Thursday, the S&P 500 fell more than 1% — its worst day since July — while more than 300 individual stocks in the index finished higher, according to MarketWatch. As Joseph Adinolfi reports, investors haven’t seen such a dramatic divergence between the index and its members since January 2025. The market, analysts say, is behaving like a seesaw: AI stocks on one side, everything else on the other.
Wall Street (Credits: MarketWatch)
AI Stocks vs. the Rest: Why the Market Is Fracturing Into Two Camps
The pressure point is the AI trade. The PHLX Semiconductor Index fell more than 6% on Thursday, pushing its decline from its June peak past 26% — squarely into bear-market territory. That index had doubled in just a few months earlier this year as investors poured money into AI “bottleneck” stocks. Now, CNN’s Fear & Greed index is screaming fear, and the 10-year Treasury yield posted its biggest daily drop since the collapse of Silicon Valley Bank as money fled to safety.
Meanwhile, the other side of the seesaw rose: consumer-staples names like General Mills and Campbell’s surged, and utilities and health care held firm. “Trading action in 2026 has started to resemble a seesaw, with AI stocks on one side and everything else on the other,” Mark Hackett, chief market strategist at Nationwide, told MarketWatch, adding that “it’s rare that we’ve had this many changes in leadership.”
Investor Whiplash: What MarketWatch Reports About the Volatility
The constant rotation between the two camps is leaving investors with what U.S. Bank’s Dan Farley calls a painful case of whiplash. NYSE advancers still outnumbered decliners, and the Dow finished essentially flat — but the Nasdaq dropped 2.6% in its steepest fall since June, with all 30 semiconductor-index members down. Analysts quoted in the report describe the split as an aggressive capital reallocation toward cash-flow certainty in a world of elevated rates, not an uncoordinated panic. How long the seesaw keeps tipping depends on earnings from the big tech names reporting in the weeks ahead.
Also Read: Treasury Yields See Extreme Plunge as Investors Duck for Cover in Bonds
Source: MarketWatch — read the full story there.
