Wall Street Rides Stock Rotation as Tech Slides: Markets Wrap
(Bloomberg) — Wall Street traders kept driving a rotation out of tech companies, whose all-weather earnings made them safe bets at times of economic uncertainty, and into a broader category of firms tuned to improving growth prospects. Gold climbed to around $5,000.
While most shares in the S&P 500 rose, the index edged lower. That’s even as data showed US service providers had the strongest back-to-back growth since 2024. Software firms were caught in another wave of selling as investors worried about the business risks they face from better artificial-intelligence tools while chipmakers sank as Advanced Micro Devices Inc.’s outlook underwhelmed investors.
“There might be a glass half full and a glass half empty perspective on the moves here,” said Kyle Rodda at Capital.com. “On the one hand, tech stocks are potentially too richly valued. On the other hand, the strength in the market is broadening out in a sign of improving economic fundamentals, backed up by data that shows more robust economic conditions.”
The dynamic will be brought into sharp focus in the next few days with more results from big techs. Alphabet Inc., the top performer among the “Magnificent Seven” megacaps last year, will report results after the close. Its $4.1 trillion market capitalization has approached Nvidia Corp.’s value after an over $2 trillion surge in the past eight months.
Action was fairly muted in the bond market, with traders parsing the latest economic data. US companies added fewer jobs than expected in January, pointing to a continued slowdown in the labor market at the start of the year. Still, recent reports have pointed to limited layoffs.
The US Treasury said it’s keeping an eye on rising demand for the shortest-dated federal securities — from both the Federal Reserve and the private sector — but still offered no tilt on Wednesday toward trimming sales of notes and bonds.
The S&P 500 fell 0.2%. The Nasdaq 100 lost 1%, breaching its 100-day moving average – a closely watched technical mark. The IShares Expanded Tech-Software Sector ETF sank 4%. The Russell 2000 of small caps slipped 0.3%.
The yield on 10-year Treasuries was little changed at 4.27%. A key part of the US yield curve is near its steepest level in four years. The dollar added 0.2%.
“Software stocks are being decimated as worries permeate over whether AI will cannibalize their businesses,” said Bret Kenwell at eToro. “However, while the long-term implications are still somewhat unknown, many of these firms continue to generate solid earnings and revenue growth, and analyst expectations for these metrics continue to trend higher.”
Kenwell notes that the software space is quickly approaching “oversold” levels and likely “nearing capitulation.”
“Right now, investors are not asking themselves where the value is,” he said. “Instead, they’re throwing out all software stocks — even as many top firms within this space are doing just fine.”
However, the bigger long-term risk may be on valuation, Kenwell said. Once this selloff is over and the stocks recover from their oversold condition, will there be a new ceiling on just how much investors are willing to pay for them.
“If so, that could limit the upside and the recovery time for this space — high quality or not,” he concluded.
“Ultimately, we view this as another AI scare with software and related areas bearing the brunt of it,” said Chris Senyek at Wolfe Research. “Within Tech, we’d use weakness to buy AI related semiconductor stocks, and our favorite sector for new money is discretionary. In particular, stocks levered to an uptick in spending as tax refunds hit in February-April.”
Corporate Highlights:
Nvidia Corp. is nearing a deal to invest $20 billion in OpenAI as part of its latest funding round, according to people familiar with the matter, marking the chipmaker’s single biggest investment in the ChatGPT developer. Amazon.com Inc. is taking the wrapper off its upgraded Alexa in the US, offering the AI-enhanced digital assistant to paying Prime customers and introducing a free version for everyone else. Texas Instruments Inc. has reached an agreement to buy the US chip firm Silicon Laboratories Inc. for about $7.5 billion, deepening its exposure to several long-standing markets for chips including the home appliance, power, industrial and medical-device sectors. Adobe Inc. ramped up its advertising in 2025, spending $1.4 billion to promote its brand in the face of steep competition and skepticism from Wall Street that the company is a loser in the age of AI. The owner of the Nasdaq 100 Index is proposing to speed up the inclusion of newly listed, large-cap firms in the widely followed equity benchmark as a flurry of technology giants are slated to go public this year. Chipotle Mexican Grill Inc.’s doldrums are set to extend into 2026, with the burrito chain offering a full year-sales target that fell short of Wall Street’s expectations. Uber Technologies Inc. issued a mixed forecast and promoted an outspoken driverless-vehicle bull to be its new chief financial officer, signaling further investment in a closely watched area of the ride-hailing company’s business. Ford Motor Co. has held discussions with China’s Zhejiang Geely Holding Group Co. about sharing manufacturing capacity in Europe, with the US carmaker seeking new global partnerships as it overhauls its electric vehicle strategy. Enphase Energy Inc. surged after the solar-equipment supplier said that the looming expiration of federal tax credits for clean electricity investments is boosting consumer demand. Johnson Controls International Plc sees its adjusted earnings per share rising at the fastest pace in a decade after strong quarterly order growth. Boston Scientific Corp. plunged after the maker of medical devices gave a profit and sales growth forecast for 2026 that fell short of Wall Street’s expectations. Eli Lilly & Co. provided an upbeat sales forecast for the year Wednesday as strong demand for its weight loss drug cemented its position at the top of the obesity market. Novo Nordisk A/S’s chief executive officer asked investors to stick with him after a dire sales forecast caused a share price rout, saying a surge in prescriptions for cheaper obesity drugs will eventually revive growth. GSK Plc’s new chief executive officer plans to speed up research and development and look for acquisitions as the British drugmaker tries to convince investors it can offset a looming patent cliff Bunge Global SA fell as the crop trader’s 2026 profit outlook fell short of expectations, with delays in US biofuels policy continuing to weigh on results for crop traders. Clear Street Group Inc., a Wall Street broker built on cloud computing technology, is looking to raise as much as $1.05 billion in an initial public offering. Brookfield Asset Management named Connor Teskey chief executive officer, marking the final step in Bruce Flatt’s long-held plans to replace himself at the helm of the $1 trillion asset manager. UBS Group AG slid even after the bank posted profit that beat expectations, amid persistent signs that the wealth management business in the US is losing ground. Infineon Technologies AG said it will ramp up its investment in technology for artificial intelligence, working to diversify its business in a prolonged slump in auto and industrial chip demand. Carlsberg A/S widened its operating profit outlook compared with last year in a move reflecting the brewer’s cautious stance over future demand for its drinks. Mitsubishi UFJ Financial Group Inc.’s profit rose in the third quarter as higher interest rates boosted lending income. BYD Co.’s German sales surged more than ten-fold last month as the Chinese automaker continues to expand in Europe’s largest electric-vehicle market. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.2% as of 10:05 a.m. New York time The Nasdaq 100 fell 1% The Dow Jones Industrial Average rose 0.2% The Stoxx Europe 600 rose 0.5% The MSCI World Index fell 0.1% Bloomberg Magnificent 7 Total Return Index fell 0.8% Philadelphia Stock Exchange Semiconductor Index fell 1.6% IShares Expanded Tech-Software Sector ETF fell 3.9% The Russell 2000 Index fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro was little changed at $1.1817 The British pound was little changed at $1.3685 The Japanese yen fell 0.5% to 156.50 per dollar Cryptocurrencies
Bitcoin fell 2.3% to $74,400.76 Ether fell 5% to $2,168.56 Bonds
The yield on 10-year Treasuries was little changed at 4.27% Germany’s 10-year yield declined two basis points to 2.87% Britain’s 10-year yield advanced one basis point to 4.53% The yield on 2-year Treasuries was little changed at 3.57% The yield on 30-year Treasuries advanced one basis point to 4.91% Commodities
West Texas Intermediate crude rose 0.2% to $63.32 a barrel Spot gold rose 1.1% to $4,999.59 an ounce ©2026 Bloomberg L.P.
