The Dow Jones Industrial Average officially recovered its losses on Wednesday, concluding a technical correction that had lasted for 27 days. Market observers believe this rebound not only reflects a revival in investor risk appetite but also underscores the significant role traditional industrial and consumer companies are playing in the artificial intelligence infrastructure boom. On Wednesday, the Dow rose by 612 points, or approximately 1.2%, closing at 49,910. Buoyed by optimistic expectations that conflict involving Iran might be nearing an end, the index successfully surpassed the critical level of 49,683, formally ending the technical correction defined by a retreat of more than 10% from its previous peak.
Compared to the S&P 500 and the Nasdaq, which have heavier weightings in technology stocks, the Dow's recovery pace has been relatively slower. Both the S&P 500 and the Nasdaq had already returned to record highs back in April and proceeded to set new closing records again on Wednesday. However, analysts point out that the Dow's recovery path better illustrates the spillover effects of AI investment into traditional economic sectors. As an index with a 130-year history, the Dow includes not only large tech firms but also 30 representative "blue-chip" companies. Among these, the industrial machinery giant Caterpillar (CAT.US) has been a major force in pulling the index out of its correction.
Data shows that since the Dow hit a recent low on March 27, Caterpillar has contributed the most to the index's rebound. The market anticipates the company stands to benefit directly from the surge in AI infrastructure development. Goldman Sachs forecasts that global AI-related capital expenditure could reach $1.6 trillion by 2031, and traditional industrial firms like Caterpillar are expected to see sustained benefits from data center construction and infrastructure expansion.
Following attacks by the US and Israel on Iran, the market experienced a "nerve-wracking phase" in the first quarter, but the investment focus has now shifted back to the AI race and the productive capacity of the US economy. It was noted that the AI trend is no longer just a story for a handful of large tech companies but is gradually spreading across the entire market, making it a "traditional economy theme" as well.
US manufacturing data also provided support. Manufacturing activity expanded for a fourth consecutive month in April, ending a prolonged period of weakness, which is seen as helping to bolster the resilience of the US economy. However, inflationary pressures persist. The US average gasoline price rose to $4.50 per gallon on Wednesday, a 44% increase year-over-year. A warning was issued that although consumer spending remains resilient for now, the household savings rate has fallen to 3.6%, a three-and-a-half-year low. Increasingly, households are relying on wealth generated from the stock market rather than income to sustain consumption, a pattern described as having an "unsound foundation."
Besides Caterpillar, consumer blue-chips such as Costco (COST.US), Walmart (WMT.US), and Coca-Cola (KO.US) also contributed to the Dow's rebound, while AI-focused stocks like Amazon (AMZN.US) and Nvidia (NVDA.US) added to the gains. Meanwhile, energy stocks faced pressure due to declining oil prices, and the financial services sector also showed relative weakness.
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