US STOCKS-Wall St stabilizes after choppy start as AI stocks recover

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Updates with afternoon prices

By Shashwat Chauhan and Sukriti Gupta

Jan 28 (Reuters) - Wall Street's main indexes overcame a choppy start to move higher on Tuesday, as AI-linked shares rebounded from sharp losses in the last session and helped the tech-heavy Nasdaq lead gains.

Monday's rout in tech stocks came after Chinese startup DeepSeek launched artificial intelligence models it said were on a par or better than industry-leading rivals in the United States at a fraction of the cost.

AI chip leader Nvidia NVDA.O rose 2.6%, a day after $593 billion was wiped off its market value in the biggest single-session loss for any company. A gauge of semiconductor shares .SOX edged 0.9% lower after losing more than 9% on Monday.

At 11:56 a.m. ET, the Dow Jones Industrial Average .DJI rose 64.23 points, or 0.14%, to 44,775.51, the S&P 500 .SPX gained 29.71 points, or 0.49%, to 6,041.99 and the Nasdaq Composite .IXIC gained 240.65 points, or 1.24%, to 19,582.50.

Eight of the 11 S&P 500 sectors were in the red. Utilities .SPLRCU were the biggest decliners with a 2.1% fall, while technology stocks .SPLRCT led gains with a 2.2% rise.

Boosting the Nasdaq, Apple AAPL.O jumped 4.2%, while most megacap stocks also trended higher.

"The selloff was an overreaction, the fact that a Chinese company poses sincere competition for the whole AI ecosystem should not be surprising," said Jim Elios, chief investment officer at Elios Financial Group.

"A correction in some of the AI-related stocks was inevitable".

The Nasdaq .IXIC dropped more than 3% on Monday, its worst single-day showing in more than a month, while the benchmark S&P 500 .SPX fell close to 1.5%.

On Tuesday, General Motors GM.N posted fourth-quarter 2024 results and a 2025 earnings forecast ahead of expectations. Its shares, however, slid 10.8% as investors weighed the threat of tariffs that could hit the automaker's business.

Boeing BA.N shares, last up 4.4%, were volatile after the planemaker reported its biggest annual loss since 2020.

Royal Caribbean RCL.N gained 12.3% as the cruise operator forecast annual profit largely above expectations, while Lockheed Martin LMT.N dropped 8.2% after the defense giant forecast 2025 profit below estimates.

Aerospace and defense major RTX RTX.N gained 2.1% after posting a rise in quarterly profit.

Earnings from "Magnificent 7" members Microsoft MSFT.O, Facebook-parent Meta META.O, Apple AAPL.O and Tesla TSLA.O are due later this week.

Also in focus, the Federal Reserve is widely expected to hold its lending rate steady in its first interest-rate decision of the year on Wednesday, while the December reading of personal consumption expenditures (PCE) is scheduled for Friday.

U.S. President Donald Trump said late on Monday he plans to impose tariffs on imported computer chips, pharmaceuticals and steel.

A media report said newly elected Treasury secretary Scott Bessent has been pushing for new universal tariffs on U.S. imports to start at 2.5% and rise gradually by the same amount each month.

Markets have been on edge about Trump's proposed tariffs due to concerns they could worsen inflationary pressures and slow Fed rate cuts.

Declining issues outnumbered advancers by a 1.71-to-1 ratio on the NYSE and by a 1.72-to-1 ratio on the Nasdaq.

The S&P 500 posted 32 new 52-week highs and 4 new lows while the Nasdaq Composite recorded 58 new highs and 113 new lows.