Wall Street is still dumping stocks tied to the AI buildout boom, and even better-than-expected earnings are offering no protection.
Caterpillar (CAT) reported results that topped market expectations, yet the share price still moved lower. The heavy equipment maker, which also supplies power generation gear to data centers, posted profit above forecasts and a record backlog of $78 billion.
However, earnings were helped by tariff refunds, revenue came in roughly in line with expectations, and management guided for only "modest" sales growth in the fourth quarter. The market had already priced in stronger growth, so the results fell short of what investors were looking for.
Caterpillar is on track for its worst trading day since April 2025, when tariff fears rattled the market, and the stock is headed for its lowest close since January. In premarket trading it fell as much as 12%, which would mark the largest single-day drop since March 2020, just two weeks before the pandemic-era low for US equities.
The shares have already broken below their February-March lows and are now approaching potential support near $625. The plunge is dramatic and stands in sharp contrast to the rally that came before it.
According to Yahoo Finance data, Caterpillar was the best-performing member of the Dow Jones Industrial Average for more than half of this year, with a year-to-date gain of 86% through the end of June that left other components far behind. It lost the top spot after early October.
Following Thursday's steep decline, the stock is down nearly 40% from its June record high, and its 2026 year-to-date return has slid back to the middle of the pack, far behind new leader Chevron (CVX). From the peak, this selloff has wiped roughly $190 billion off Caterpillar's market value.
Some investors had already begun heading for the exits before the earnings release. Todd Sohn, managing director and ETF chief strategist at Baird-Strategas, found that investors are pulling cash out of funds that hold economically sensitive names like Caterpillar and rotating into defensive sectors such as healthcare and utilities.
In a Tuesday research note, Sohn wrote that such a defensive flight is unusual with the S&P 500 so close to a record high, and that it shows expectations for cyclicals have already been pressed very low. "The bar for a cyclical rebound is not high," he said.
During Thursday's slide, Caterpillar broke through its February and March lows around $665 and is now testing support near $625, a level where buyers stepped in back in January. If the $625 support gives way, the next level sits at $540, and a drop to that point would erase all of the stock's 2026 gains.
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