UBS Group's Mark Paski notes that, excluding AI stocks, the S&P 500 constituents are on track to post a 6% gain this month—the best monthly performance since AI trading began heating up in 2022–2023. With interest rates easing and corporate earnings remaining resilient, the rally is spreading from a handful of consumer-sector leaders to a broader range of stocks.
On Friday morning, AI stocks suffered another sharp sell-off,$NASDAQ 100 Index (.NDX.US)$Despite a 3% decline, the equal-weighted S&P 500 index bucked the trend, rising by roughly 1.2%. The divergence within the index underscores that the bulk of the losses was concentrated in large-cap tech stocks and AI‑related shares.
The S&P 500 fell 1.5% at the time. Intel posted its largest intraday drop on record, and AI-driven selling deepened this week's decline in tech stocks; Goldman Sachs' GS Broad AI US Index, which tracks U.S.-listed AI-related stocks, dropped 4.7%.
Defensive sectors, meanwhile, were in demand. Consumer staples was the best-performing sector in the S&P 500, rising 1.64%, with its index briefly hitting a record high before the New York midday session.
Earnings reports bolster essential consumption.
The S&P 1500 Consumer Staples Index rose as much as 2.3% during the session before giving back some of its gains by around 11:00 a.m. Eastern Time. Leading the advance were two companies that had just reported strong earnings.
$Colgate-Palmolive (CL.US)$The stock rose as much as 5.5% in pre-market trading and was up about 2.5% at the open. The household and personal care company posted both profit and total sales that exceeded Bloomberg consensus estimates. Despite softer-than-expected performance in the U.S. and North American markets, conditions are improving, with strong earnings and upbeat guidance prevailing.
Snack manufacturer$Mondelez International (MDLZ.US)$Pre-market gains exceeded 7% slightly, with the stock up about 3% ahead of the midday session. The company's third-quarter results beat expectations, driven primarily by steady sales growth.
Excluding AI stocks, the S&P 500 is on track to rise 6% this month.
Mark Paski of UBS Group said that, excluding AI stocks, the S&P 500 constituents are expected to rise 6% this month, marking the best monthly performance since AI trading began to heat up in 2022–2023.
He believes that, as interest rates decline and corporate earnings remain resilient, the rally is broadening from a handful of leading stocks to a wider range of equities. Early in the third-quarter earnings season, 78% of companies reported earnings per share that exceeded market expectations, yet profit margins remain a key challenge for consumer‑focused firms.
Consumer discretionary companies are also relatively optimistic about demand. Hilton expects the growth momentum of its hotel portfolio to continue for the remainder of this year and into 2027, while Royal Caribbean reports that booking levels for 2027 are ahead of historical averages and pricing is higher.$JetBlue Airways (JBLU.US)$This indicates that September's strong performance carried over into October. Paski cautioned, however, that greater uncertainty still looms over earnings and profit margins.
"If market breadth continues to improve, in addition to the recent outperformers, consumer stocks with stronger fundamentals will also become increasingly attractive for allocation," he wrote.
Judging from Friday's market action, investors are shifting capital from AI‑related stocks to defensive sectors, rather than staging a panic‑driven, across‑the-board retreat from the equity market. Even as AI‑related trades have taken a severe hit, individual stocks have largely held their ground.
Editor/Jeffy