By Noel Randewich and Sruthi Shankar
Oct 15 (Reuters) - The S&P 500 was near flat on Thursday, recovering from an earlier drop as investors concerned about AI stocks shifted into Eli Lilly, UnitedHealth and other healthcare and consumer stocks.
Trading in technology stocks was mixed, as investors scrutinized AI-related companies whose debt loads leave them vulnerable to rising interest rates.
Drugmaker Eli Lilly gained 4.6%, UnitedHealth was up 3.6% and Walmart rose 2% after rating upgrades by Deutsche
Bank. Those three companies were heavy contributors to the S&P 500's modest gain for the session.
Broadcom and Nvidia each dipped more than 1% after chip manufacturer TSMC struck a cautious note on 2027 despite reporting a sixth consecutive record quarterly profit on robust AI-driven demand.
Dell Technologies dropped over 8% and Hewlett Packard Enterprise fell 5.8%, with both server makers adding to sharp losses in the prior session related to worries about AI companies exposed to higher borrowing costs.
Seven of the 11 S&P 500 sector indexes rose, led by healthcare, up 2.36%, followed by a 1.42% gain in materials.
The yield on 10-year Treasuries retreated but remained near multiyear highs as investors worry about inflation related to high oil prices.
"The cost to finance everything, whether it be a new single-family house or a giant data center, is going up, and that has implications for lots of stuff in the stock market," said Jed Ellerbroek, portfolio manager at Argent Capital Management. "The best performing stocks today are the non-cyclical, defensive businesses."
The Philadelphia semiconductor index fell about 2.5%, putting it on track for a seventh straight decline.
The S&P 500 was last up 0.02% at 7,720.35 points.
The Nasdaq declined 0.43% to 26,577.25 points, while the Dow Jones Industrial Average was up 0.88% at 52,074.56 points.
After hitting a record high last week, the S&P 500 remains up almost 13% in 2026, with most of that gain fueled by AI-related stocks.
The S&P 500 is trading at about 19 times expected earnings, around its lowest level since 2023. The index's relatively low price-to-earnings valuation suggests investors are pricing in an eventual end to the massive earnings growth fueled by AI heavyweights, Ellerbroek said.
Data on Thursday showed US producer prices increased by the most in 4-1/2 years in September amid rising goods and services costs, the latest indication of inflation broadening beyond energy products.
Hotter-than-expected consumer inflation data on Wednesday fueled expectations of further interest-rate hikes by the US Federal Reserve, contributing to a Wall Street selloff.
Interest rate traders are pricing in a 67% chance the Fed will raise interest rates by its December policy meeting, up from a 62% probability on Wednesday, according to CME's FedWatch tool.
Shares of Rocket Lab dropped 10% after the space company said the inaugural launch of its new, larger Neutron rocket was delayed until next year.
FMC tumbled 34% after the agrichemicals company sharply cut its third-quarter outlook.
Advancing issues outnumbered falling ones within the S&P 500 by a 2.6-to-1 ratio.
The S&P 500 posted 24 new highs and no new lows; the Nasdaq recorded 57 new highs and 368 new lows.
(Reporting by Sruthi Shankar and Purvi Agarwal in Bengaluru, and by Noel Randewich in San Francisco; additional reporting by Darshan Kumar; Editing by Rashmi Aich, Pooja Desai, Rod Nickel)
