US STOCKS-Wall Street muted as tech stocks waver after selloff; financials outshine

By Purvi Agarwal and Twesha Dikshit

Feb 17 (Reuters) - The main U.S. stock indexes were subdued in volatile trading on Tuesday after a long weekend, as heavyweight technology stocks teetered following an AI-led selloff and the financials sector outperformed the broader market.

The S&P 500 information technology sector .SPLRCT pared declines to trade slightly higher as gains in Nvidia NVDA.O and Apple AAPL.O were limited by a decline in Microsoft MSFT.O.

Worries about artificial intelligence disrupting business models had sparked a selloff in software firms, brokerages and trucking companies the previous week, causing Wall Street's three main indexes to log their steepest weekly decline since mid-November.

Potential risks from Chinese AI players exacerbated the uncertainty. On Monday, Alibaba unveiled a new AI model, Qwen 3.5, designed to independently execute complex tasks.

Software stocks remained pressured, with the broader S&P 500 software index .SPLRCIS falling 1.4%. CrowdStrike CRWD.O fell 5%, Adobe ADBE.O lost 2% and Salesforce CRM.N was down between 2% and 5%.

"It's an indiscriminate selling in all things tech, with more of a focus on software and the potential for some software application companies to be disrupted," said Art Hogan, chief market strategist at B Riley Wealth.

"When this movement against technology gains momentum, it's very hard to find something that's going to stand out for a while."

At 11:45 a.m. ET, the Dow Jones Industrial Average .DJI rose 33.25 points, or 0.07%, to 49,534.18, the S&P 500 .SPX gained 0.63 points, or 0.01%, to 6,836.80, and the Nasdaq Composite .IXIC lost 21.58 points, or 0.10%, to 22,525.09.

The S&P 500 financials index .SPSY was a bright spot, adding 1.2%. Big banks such as Goldman Sachs GS.N and JPMorgan Chase JPM.N were up 1.5% each, also supporting the Dow.

Materials .SPLRCM and energy .SPNY on the S&P 500 fell tracking a dip in commodity prices.

This week, the personal consumption expenditure report - the U.S. Federal Reserve's preferred inflation gauge - will be in focus for insights into inflation and how it could impact the central bank's rate-cut trajectory.

The data follows cooler-than-expected consumer inflation data last week that slightly raised bets on interest-rate cuts this year.

Traders are pricing in a 25-basis-point reduction in June, with the odds at 52%, compared with a close-to-49% chance a week ago, according to CME's FedWatch Tool.

Fed policymakers including Michael Barr and Mary Daly are scheduled to speak on the day.

Norwegian Cruise Line NCLH.N topped the S&P 500 with an about 10% jump after activist investor Elliott said it had built a more than 10% stake in the cruise operator.

Warner Bros WBD.O rejected Paramount's PSKY.O revised takeover bid, giving the studio a week to negotiate a better deal. The companies rose 2.9% and 6.9%, respectively.

Fiserv's FISV.O shares gained almost 6% after the Wall Street Journal reported activist investor Jana Partners had taken a stake in the payments company.

Masimo MASI.O surged 34% after Danaher DHR.N said it would acquire the pulse-oximeter maker for $9.9 billion, including debt. Danaher shed 3%.

Meanwhile, Iran reached an understanding with the United States in a second round of nuclear talks, held in Geneva, but said more work needed to be done.

Declining issues outnumbered advancers by a 1.25-to-1 ratio on the NYSE, and by a 1.28-to-1 ratio on the Nasdaq.

The S&P 500 posted 37 new 52-week highs and nine new lows, while the Nasdaq Composite recorded 62 new highs and 170 new lows.