By Sukriti Gupta and Twesha Dikshit

Wall Street’s main indexes dropped on Thursday, led by declines in financial stocks, while earlier gains in semiconductor shares on renewed optimism about artificial intelligence faded.

The S&P 500 financials index SPF declined 2%. The S&P 500 insurance index (.SPXIN) dropped 3.5% to an over six-month low. Insurance bellwether Travelers TRV fell short of analysts’ estimates on quarterly revenue. The stock dropped 3%.

The KBW Regional banks index KKRX also shed 4.5% after Zions Bancorp ZION disclosed it would take a $50 million loss in the third quarter on two commercial and industrial loans from its California division.

A rally in chipmakers had lifted markets earlier in the day after TSMC 2330 raised its full-year revenue forecast on a bullish outlook for spending on artificial intelligence.

“It’s just a period of uncertainty and of course the closing of the federal government is continuing on and although markets have been somewhat patient, at some point they will relent,” said Peter Andersen, founder of Andersen Capital Management in Boston.

Wall Street’s record rally on AI-driven optimism and U.S. interest rate cuts bets sputtered after Sino-US tensions flared up again on Friday over China’s rare earth export curbs, prompting investors to flee risk assets.

Wall Street’s fear gauge <.VIX rose 2.17 points to 22.81.

At 01:06 p.m. ET, the Dow Jones Industrial Average DJI fell 197.65 points, or 0.43%, the S&P 500 SPX lost 32.87 points, or 0.49%, and the Nasdaq Composite IXIC lost 86.23 points, or 0.38%.

Heavyweights Apple AAPL and Tesla TSLA dropped 1.1%, each, weighing on the S&P 500 and the Nasdaq.

“With the stock market that’s been as strong as it has, I think there’s some good reasons to take some profits here,” said Dennis Dick, chief strategist at Stock Trader Network.

Robust earnings from major U.S. banks also grabbed attention this week, offering fresh signs of economic resilience at a time when official macroeconomic reports remain delayed due to an ongoing government shutdown.

Meanwhile, investors were awaiting developments on the U.S.-China trade front. U.S. Treasury Secretary Scott Bessent emphasized on Wednesday that Trump was ready to meet his Chinese counterpart in South Korea later this month.

Among other moves, Salesforce CRM rose 5.7% as it forecast revenue of more than $60 billion for 2030, above Wall Street estimates.

Hewlett Packard Enterprise HPE slumped 9.2% after it forecast annual profit and revenue below Wall Street expectations.

J.B. Hunt JBHT shares jumped 20% after a higher third-quarter profit.