Wall Street Rides Stock Rotation as Tech Slides: Markets Wrap

(Bloomberg) — Wall Street traders kept driving a rotation out of tech giants, 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. Bitcoin extended its rout.

While most shares in the S&P 500 rose after solid US services data, the index edged lower. Software firms were caught in another wave of selling, but moves were more pronounced in chipmakers on Wednesday, with Advanced Micro Devices Inc. tumbling 14% after its outlook underwhelmed investors. Commodity producers, consumer staples and banks climbed.

“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 muted in the bond market, with traders parsing economic data. US service providers saw the strongest back-to-back growth since 2024. While a separate report showed companies added fewer jobs than expected in January, recent data has 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 0.3%. The Nasdaq 100 lost 1.4%, breaching its 100-day moving average. The IShares Expanded Tech-Software Sector ETF slid 2%. A closely watched gauge of chipmakers sank 3.8%.

The yield on 10-year Treasuries rose one basis point to 4.28%. A key part of the US yield curve is near its steepest level in four years. The dollar added 0.3%. Almost half a trillion dollars has been wiped off cryptocurrencies in less than a week as a slide led by Bitcoin accelerated.

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“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, the question is: 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.”

“It’s been a tough week so far, but let’s keep in mind the broader picture here,” said Mona Mahajan at Edward Jones. “It is hard to get overly bearish when we are still looking at an economy that we think is growing above trend”

Mahajan also notes she’s looking at an earnings growth picture that is still double digits for 2026, driven by tech sectors but also non-tech sectors

“So a little broadening there,” she said.

Tech is stepping back as cyclical and defensive stocks step up, and while the recent volatility caught attention, the data points to a technical reset, not a fundamental break, according to Mark Hackett at Nationwide.

“This is a rotation, not a rupture,” he said. “Seeing that shift near record highs highlights the market’s underlying strength.”

Hackett also noted that the fundamental picture remains robust. Fourth quarter earnings are set to extend the double-digit winning streak to five quarters, with elevated sales growth, record margins, greater breadth of the earnings strength, solid 2026 guidance and improving corporate sentiment, he said.

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. New York Times Co. tumbled after the company reported strong fourth-quarter results that also raised concerns on Wall Street about a jump in spending. 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. Prudential Financial Inc. said it would voluntarily suspend new life insurance sales in Japan for 90 days, in a move to restore trust following misconduct by employees that has prompted a regulatory probe. 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. Egypt banned Roblox Corp.’s gaming platform, as the Middle East’s most populous nation says it’s trying to curb children’s exposure to potentially harmful online material. D.E. Shaw & Co. criticized the board of CoStar Group Inc. in a letter to the company, putting further pressure on the real estate analytics group as it faces a separate campaign from activist investor Dan Loeb. 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. Bunge Global SA rose on expectations the giant crop trader will benefit from emerging biofuels policy as it continues the integration of Viterra into its folds. 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 0.3% as of 11:02 a.m. New York time The Nasdaq 100 fell 1.4% The Dow Jones Industrial Average rose 0.6% The Stoxx Europe 600 rose 0.3% The MSCI World Index fell 0.2% Bloomberg Magnificent 7 Total Return Index fell 1.2% Philadelphia Stock Exchange Semiconductor Index fell 3.8% IShares Expanded Tech-Software Sector ETF fell 2% The Russell 2000 Index fell 0.8% AMD fell 15% KBW Bank Index rose 1.3% Currencies

The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.2% to $1.1798 The British pound fell 0.3% to $1.3659 The Japanese yen fell 0.6% to 156.64 per dollar Cryptocurrencies

Bitcoin fell 3.1% to $73,799.51 Ether fell 5.9% to $2,147.8 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.28% Germany’s 10-year yield declined two basis points to 2.87% Britain’s 10-year yield advanced two basis points to 4.54% The yield on 2-year Treasuries was little changed at 3.57% The yield on 30-year Treasuries advanced two basis points to 4.91% Commodities

West Texas Intermediate crude was little changed Spot gold fell 0.8% to $4,907.79 an ounce ©2026 Bloomberg L.P.