MW The Dow is about to exit correction territory, showing the old-school economy's role in the AI boom
By Joy Wiltermuth
The Dow is trading above the 49,683.30 threshold it needs to hold through the close to officially exit correction territory
The Dow is on pace to exit correction territory on Wednesday.
The Dow Jones Industrial Average was on pace Wednesday to exit correction territory after 27 days, underscoring the important role of the "old-school" economy in the AI boom.
Unlike the tech-centric S&P 500 SPX and Nasdaq Composite Index COMP, the 130-year-old Dow DJIA has been on a slower path to recovery from the rout that hit equities at the onset of the Iran war. The Dow includes a number of the world's biggest tech names, but is also gives investors exposure to a diverse group of 30 companies - many of the world's most financially stable and important.
To drive the point home, Caterpillar $(CAT)$ shares were the top contributor to the Dow's recovery from its 10.2% drop from its correction low of 45,166.64 on March 27, as well as its move back to the cusp of 50,000, according to Dow Jones Market Data, as the below chart shows.
The Dow was up more than 625 points, or 1.3%, to about 49,925 ahead of midday trade Wednesday on renewed optimism around a potential end to the Iran war. The blue-chip index can exit correction with a close above 49,683.30.
Caterpillar's earnings at the end of April reflected its tangible role in the estimated $765 billion spending boom this year to build out artificial intelligence. Goldman Sachs anticipates AI-related annual capital expenditures will reach $1.6 trillion in 2031, with the manufacturer of construction and mining equipment poised to benefit along the way.
Read: Caterpillar rides strong AI power demand to a big earnings beat - and a stock surge
"We had kind of a sweaty first quarter," said Talley Leger, chief market strategist at the Wealth Consulting Group, of the selloff in stocks after the U.S.-Israeli attacked Iran in late February. But now Leger's focus is back where he started the year - on the AI race and the productive capacity of the U.S. economy.
"This is not just about five companies," Leger said of the small group of "hyperscaler" tech companies at the heart of the AI race. "This is about the ripple effects across the market. Now, it's also an old-economy theme."
Of note, manufacturing activity expanded in April for the fourth month in a row, following a prolonged recession in activity. That should give the economy more breathing room as many households feel the pinch of increased inflation and with average gas prices at $4.5 a gallon on Wednesday, up 44% from a year ago.
Consumers have been holding up surprisingly well despite extra costs during the Iran war, "but the scaffolding is showing cracks," according to Bob Schwartz, senior economist at Oxford Economist. He noted the savings rate sank to a 31/2-year low of 3.6% in March "as households leaned on stock market wealth rather than income to fuel spending - a precarious foundation," in a May 1 client note.
Shares of Costco $(COST)$, Walmart $(WMT)$ and Coca-Cola $(KO)$ also contributed to the Dow's recovery from its correction, as did those of AI plays Amazon (AMZN) and Nvidia (NVDA), according to Dow Jones Market Data.
Shares of oil companies were following crude (CL00) (BRN00) prices lower Wednesday, while financial shares in the Dow have remained under pressure.
The S&P 500 and Nasdaq quickly returned to record highs in April.
Read: If stocks are to continue rising, energy prices need to start falling, Barclays says
Mike DeStefano contributed
-Joy Wiltermuth
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 06, 2026 11:32 ET (15:32 GMT)
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