U.S. stocks gain as AI dealmaking offsets software selloff

U.S. equities clawed back ground Wednesday, with the S&P 500 up 0.5% as a fresh wave of artificial intelligence dealmaking offset an ugly session for high-multiple software and cybersecurity stocks.

The S&P 500 rose 0.5% to 7,668.79, while the Dow Jones Industrial Average advanced 235 points, or 0.4%, to 53,002.29.

The Nasdaq 100 fell 0.2% to 29,012.77. • Credo Technology Group shares are sliding.

Why is CRDO stock falling? Within Magnificent Seven stocks, NVIDIA Corp. (NASDAQ: NVDA ) surged 4.7% to $227.66 on reports it is in advanced talks to acquire Hugging Face for $14 billion.

Rate-hike expectations remain the dominant macro story and the direct cause of the growth-stock carnage.

Futures are pricing a roughly 66% probability that the Federal Reserve raises rates by 25 basis points later this month, up sharply from about 40% a week ago, after Fed Chair Kevin Warsh used his Jackson Hole address to recommit to fighting inflation.

Wednesday’s data cut the other way: ADP showed private payrolls rose just 38,000 in August, the weakest since January and below the 47,000 consensus, while July factory orders climbed 0.9% versus the 0.6% expected.

On the geopolitical front, the U.S. said it launched overnight airstrikes on Iranian targets, Tehran retaliated, and reports of hits on tankers near the strait kept a war premium embedded in crude.

West Texas Intermediate crude rose 0.6% to $90.78 a barrel, holding near six-week highs.

Brent added 1.0% to $95.55.

The bond market took a breather without giving much back.

The 10-year Treasury yield held at 4.81% after a five-session run to its highest level since October 2023, while the 5-year sat at 4.56%.

Gold rebounded 1.0% to $4,372.53 an ounce, recovering from a one-month low as the dollar retreated, though the metal remains down 4.9% over the past week.

Markets now await Broadcom Inc. (NASDAQ: AVGO ) ‘s quarterly results after the bell.

Wednesday’s Performance In Major U.S.

Indices Index Last % Change MTD YTD S&P 500 7,668.79 +0.5% -0.2% +12.2% Dow Jones 53,002.29 +0.4% -0.3% +10.3% Nasdaq 100 29,012.77 -0.2% -1.5% +15.4% Russell 2000 2,946.78 +0.9% -0.2% +19.0% Updated by 12:30 PM ET According to the Pro platform: The Vanguard S&P 500 ETF (NYSE: VOO ) gained 0.5%.

The SPDR Dow Jones Industrial Average ETF Trust (NYSE: DIA ) rose 0.4%.

The Invesco QQQ Trust (NASDAQ: QQQ ) slipped 0.2%.

The iShares Russell 2000 ETF (NYSE: IWM ) rallied 0.9%.

Beat The Number, Lose The Multiple: Software Punished Anyway The Materials Select Sector SPDR Fund (NYSE: XLB ) was the best performer, up 1.9%, ahead of the Communication Services Select Sector SPDR Fund (NYSE: XLC ), up 1.7%.

The Consumer Staples Select Sector SPDR Fund (NYSE: XLP ) added 0.9%, the Financial Select Sector SPDR Fund (NYSE: XLF ) rose 0.8% as a steeper curve lifted bank margins, and the Health Care Select Sector SPDR Fund (NYSE: XLV ) gained 0.7%.

Three sectors sat in the red.

The Real Estate Select Sector SPDR Fund (NYSE: XLRE ) fell 0.5%, while the Technology Select Sector SPDR Fund (NYSE: XLK ) and the Utilities Select Sector SPDR Fund (NYSE: XLU ) each slipped 0.2%.

The Energy Select Sector SPDR Fund (NYSE: XLE ) rose 0.3% and remains the runaway 2026 leader, up 47.3% year-to-date against XLK’s 27.7%.

At the industry level, the VanEck Gold Miners ETF (NYSE: GDX ) led with a 2.4% advance as bullion bounced.

The U.S.

Global Jets ETF (NYSE: JETS ) climbed 1.5% and the VanEck Agribusiness ETF (NYSE: MOO ) rose 1.5%, while the SPDR S&P Insurance ETF (NYSE: KIE ) gained 1.2%.

On the losing side, the First Trust Dow Jones Internet Index Fund (NASDAQ: FDN ) fell 0.3%.

Credo Technology Group Holding Ltd (NASDAQ: CRDO ) was the session’s worst performer, collapsing 18.7% to $168.09 in its first full session after Tuesday’s print.

The AI connectivity supplier posted record fiscal first-quarter revenue and net income on strength in active electrical cables, optics and retimers, with adjusted EPS of $1.20 against a $1.17 consensus, and guided to more than 85% year-over-year revenue growth with optical revenue above $600 million in fiscal 2027.

The beat was not enough given the market’s lofty expectations for the futures.

MongoDB, Inc. (NASDAQ: MDB ) told a near-identical story, tumbling 11.9% to $382.62.

Second-quarter fiscal 2027 revenue rose 30% to $771.8 million versus the $732.9 million consensus, adjusted EPS came in at $1.90 against $1.61 expected, Atlas revenue grew about 29% and the company added a record 2,900 net new customers to reach 70,600.

MongoDB also raised full-year revenue guidance to $2.99 billion to $3.03 billion and adjusted EPS to $6.39 to $6.58, both above Street estimates.

Investors sold it anyway, focusing on rising AI infrastructure costs.

Palo Alto Networks, Inc. (NASDAQ: PANW ) completed the set, sinking 10.3% to $324.88.