Dow Jones Industrial Average falls for a second day as tech rally hesitates

• The Dow Jones backslid around 150 points on Wednesday.
• Market sentiment buoyancy is facing fresh challenges on multiple fronts.
• The AI tech rally has pushed key companies deep into overvalued territory, steepening pullback volatility.

The Dow Jones Industrial Average (DJIA) followed the broader market lower on Wednesday, shedding 270 points at its lowest. Investors are taking profits and trimming their exposure to the AI-fueled tech rally ahead of the latest US employment figures and inflation data.

The Dow Jones has eased lower for the second day in a row after punching in fresh all-time highs this week, punching a small hole through the 46,700 level before slipping back into recent technical territory around 46,150. The Dow is still trading deep into bull country, a full 6.5% above its 200-day Exponential Moving Average (EMA) near 43,350.

AI investment: An ouroboros of shuffling cash

AI tech rally darling Nvidia (NVDA) fell another 1% on Wednesday, extending its recent decline as investors grow increasingly concerned about the insular investment scaffold that the AI industry has built itself around. Mega partnerships between tech giants, such as Nvidia's recent $100 billion stake in OpenAI and recent investment announcement with Intel (INTC) show that plenty of investment capital is sloshing around the AI tank, but real bottom-line revenues for the AI industry remain elusive after several years of ever-climbing valuations.

Wednesday was a meager affair on the economic data docket. US New Home Sales Change rebounded to its strongest level since late 2022, clocking in at 20.5 versus its previous contraction of 1.8, but the mid-tier figure is still within its long-term range. The latest 5-year Treasury auction saw yields slip back to 3.7% from 3.724%, but the figure still remains elevated from recent lows near 3.75% as investors remain uneasy about the US government barreling into another budget crisis. The Trump administration is struggling to avert a government funding shutdown with President Donald Trump canceling key budget meetings with US elected officials.

The US is releasing its latest Personal Consumption Expenditures Price Index (PCE) inflation report this Friday. Investors will be paying close attention to find out if enough businesses are absorbing some of the costs to prevent rapidly passing too much of the tariff expenses directly onto consumers.

Dow Jones daily chart