US STOCKS-S&P 500 ends lower, AI stocks buoy Nasdaq

By Noel Randewich

NEW YORK, Jan 7 (Reuters) - The S&P 500 ended lower on Wednesday, pulled down by declines in JPMorgan, Blackstone and other financials, while Nvidia and Alphabet lifted the Nasdaq as investors shifted toward AI-related stocks.

Drops in the S&P 500 and Dow Jones Industrial Average followed intraday record highs earlier in the session.

Shares of housing acquisition companies tumbled after President Donald Trump said he was moving to ban Wall Street investors from buying single-family homes, in a bid to reduce home prices.

Blackstone BX.N and Apollo Global Management APO.N dropped more than 5%, contributing to a 1.4% decline in the S&P 500 financials index .SPSY. American Homes 4 Rent AMH.N fell 4.3%.

Real estate platform Zillow ZG.O moved over 2% higher.

JPMorgan Chase JPM.N fell 2.3% after Wolfe Research downgraded the bank to "peer perform" from "outperform."

Northrop Grumman NOC.O slid 5.5% and Lockheed Martin LMT.N lost 4.8% after Trump said he would not permit dividends or stock buybacks for defense companies until they fix problems with the production of military equipment. In his social media post, Trump did not mention specific companies.

Nvidia NVDA.O and Microsoft MSFT.O rose about 1% each, and Alphabet GOOGL.O rose more than 2% as investors shifted back into AI stocks following recent worries they were overvalued.

Underscoring investor appetite for heavyweight AI players, Anthropic is planning a multibillion-dollar fundraise that would value the Claude chatbot maker at $350 billion. That would make the privately held company more valuable than the vast majority of corporations, including Advanced Micro Devices AMD.O, Chevron CVX.N and Wells Fargo WFC.N.

"Investors have come into 2026 with a similar playbook to last year: Buy tech and forget about it. Rumors that the AI trade was done turned out not to be true," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

Heading into fourth-quarter earnings season in the next few weeks, valuations on Wall Street remain relatively pricey. The S&P 500 is trading at about 22 times expected earnings, down from 23 in November, but above the index's five-year average of 19, according to LSEG data.

The S&P 500 declined 0.34% to end the session at 6,920.93 points.

The Nasdaq gained 0.16% to 23,584.28 points, while the Dow Jones Industrial Average declined 0.94% to 48,996.08 points.

Data on Wednesday showed U.S. job openings fell more than expected in November after rising marginally in October, while a separate ADP report showed that private payrolls increased less than expected in December.

While the latest labor market datasets mark a return to the standard release of economic data disrupted by the U.S. government shutdown, they did little to change expectations of interest rate cuts from the Federal Reserve ahead of Friday's key government payrolls report.

Investors were also monitoring geopolitical developments after the U.S. said it seized a Russian-flagged, Venezuela-linked tanker as part of Trump's aggressive push to dictate oil flows in the Americas and force Caracas' socialist government to become its ally.

The White House said on Tuesday that Trump was discussing options for acquiring Greenland, including potential use of the U.S. military.

Memory and storage technology companies gave up some of their steep gains following a recent rally. Western Digital WDC.O dropped almost 9% and Seagate Technology STX.O fell 6.7%.

First Solar FSLR.O tumbled 10% after Jefferies downgraded the solar panel maker's rating to "hold" from "buy."

Declining stocks outnumbered rising ones within the S&P 500 .AD.SPX by a 3.4-to-one ratio.

The S&P 500 posted 28 new highs and 17 new lows; the Nasdaq recorded 106 new highs and 58 new lows.

Volume on U.S. exchanges was relatively heavy, with 17.4 billion shares traded, compared with an average of 16.2 billion shares over the previous 20 sessions.