Technology shares had their worst day in a while, while investors moved money into health care and consumer staples.
Wall Street had a split personality on Wednesday, Oct. 14. Technology and other fast-growing stocks fell sharply after a hotter-than-expected inflation report, while steadier corners of the market, such as health care and household staples, rallied. The result was a modest loss for the Dow and much bigger drops for the tech-heavy Nasdaq and small-company stocks.
How the major indexes closed
The S&P 500 fell 86.51 points, or 1.11%, to 7,718.94. The Nasdaq Composite dropped 511.51 points, or 1.88%, to 26,692.87. The Dow Jones Industrial Average slipped just 48.62 points, or 0.09%, to 51,621.48. The Russell 2000, which tracks smaller companies, fell 1.93%. The Cboe Volatility Index, often called Wall Street's "fear gauge," rose 10% to 16.82.
The day's trigger was the September Consumer Price Index, which showed inflation at 3.7% over the past year and core inflation a bit hotter than forecast. That pushed the 10-year Treasury yield up to about 5.28% and revived bets that the Federal Reserve could raise interest rates again.
Why tech took the biggest hit
Higher interest rates tend to hurt growth stocks the most. These are companies whose value depends heavily on profits expected far in the future, and when rates rise, those future profits are worth less in today's dollars. Many AI and data center companies are also borrowing heavily to build, so higher borrowing costs bite twice.
The information technology sector fell 3.0%, the worst of any S&P 500 sector. Oracle dropped about 8.8% amid worries about the cost of its AI expansion. Dell fell about 11% after Barclays downgraded it, and AI cloud provider CoreWeave also slid. Big names were not spared either: snapshots during the day showed Meta and Nvidia each down more than 3%.
Where money went instead
Investors rotated into defensive sectors, meaning parts of the market that tend to hold up when the economy or rates are uncertain. Health care rose 2.44% and consumer staples 2.21%, the best performers of the day. Drugmakers led the way, with AstraZeneca, Merck, Bristol-Myers Squibb, AbbVie, Eli Lilly and Pfizer each up roughly 4% at midday. Energy stocks rose too, helped by oil near $95 a barrel.
Earnings season added its own swings. BlackRock rose after beating forecasts, while Bank of America, State Street and Progressive fell after results disappointed.
What this means for your wallet
Days like this are a reminder of why diversification matters. A portfolio packed with tech stocks felt Wednesday's drop far more than one that also held health care, consumer staples, energy and bonds. If most of your money sits in a handful of popular tech names, it may be worth checking whether that matches how much risk you can stomach.
It's also a reminder that a single bad day is normal. Even after Wednesday's drop, the S&P 500 is near historically high levels. Selling in a panic often locks in losses, while investors who stick with a steady plan, such as regular contributions to diversified funds, give themselves time to recover from rough patches.
If you're investing new money, spreading purchases out over time, a strategy called dollar-cost averaging, can take some of the guesswork out of choosing when to buy.
This article is for education only and is not financial advice. Everyone's situation is different.
Content on The Evergreen Edit is for educational and informational purposes only and is not individualized financial, investment, tax or legal advice. Learn more.
This article is for educational purposes only and isn't personalized financial, tax or legal advice. Consider talking with a qualified professional about your situation.
Kiara Miller — Founder & Editor
Kiara Miller is the founder and editor of The Evergreen Edit. He has been doing independent finance research for two decades and reviews every article before it's published.
More about Kiara →Get smarter about your money.
Join readers who get The Sunday Edit every week.
