US stocks stumble to start September with another day of AI names dumped

The global sell-off in long-term government bonds weighed on risk assets on Tuesday, accentuating the pullback in the AI trade seen in the final trading day of August. However, stocks did manage to close at session highs after facing steep losses during the morning.

The S&P 500 ended down 0.7%, the Nasdaq 100 gave back 0.8%, and the Russell 2000 fell 0.6%.

A Morgan Stanley basket of AI tech beneficiaries is down 5.5% over the past two sessions, its worst two-day drubbing since the sessions immediately following “Liberation Day” on April 2, when the extent of President Donald Trump’s reciprocal tariff regime was unveiled.

Energy and healthcare were the only two S&P 500 sector ETFs to eke out gains, while tech was unsurprisingly at the bottom of the leaderboard.

The day’s bright spots were led by Ulta, which surged 8.1% as traders piled into the stock after the beauty retailer posted strong Q2 earnings on Friday. Kraft Heinz shares led declines, sinking 7% after the ketchup maker said it planned to split into two separate companies.

Nvidia dropped 2% amid a broad pullback in the AI trade as the chip giant’s newsroom pushed back on what it called “erroneous chatter in the media.”

CoreWeave sank 9.4% as its top shareholder, along with several executives, continued to take profits now that they’re finally allowed to sell.

Lucid shares fell 10.8%, hitting an all-time low on the first day that the luxury EV maker’s 1-for-10 reverse stock split took effect.

Constellation Brands dropped 6.6% after the beer giant slashed its full-year guidance, as the Modelo and Corona parent company braces for softer sales.

Canopy Growth fell 17.5% after the cannabis company filed for a $200 million equity offering on Friday, a move that would dilute existing shares and could put downward pressure on the stock.

Paramount Skydance dipped 1.6% after the production powerhouse announced a deal with Microsoft’s Activision to create a live-action “Call of Duty” film.

PepsiCo shares jumped as much as 5.9% before closing up 1.1% after The Wall Street Journal reported that Elliott Investment Management has taken an activist position of roughly $4 billion the company.

Nio rose 3.4% even as the Chinese EV company (and Tesla rival) posted a deeper net loss and lower revenue than Wall Street expected for the second quarter.

Frontier shares flew 14.5% higher after Deutsche Bank upgraded the stock to “buy” from “hold” following Friday’s news that rival Spirit Airlines had filed for its second bankruptcy in a year.