It was a poor day for US equities generally, with tech shares main the declines. The S&P 500 closed down by 0.8% with the Nasdaq down by 1.4%. In the meantime, the Dow fared higher in closing down by simply 0.3%.
What’s attention-grabbing concerning the selloff yesterday is how tech-heavy they had been for essentially the most half. Tech shares dragged down the S&P 500 even when greater than half of the shares within the index ended larger on the day. That speaks to the weightage but in addition how maybe there may be some rotational play taking place in Wall Road.
S&P 500 shares heatmap (3 February 2026)
The continuing narrative for the reason that flip of the 12 months is that there are considerations that AI valuations have stretched out too far. It’s about time for tech companies and people investing closely in AI to ship some outcomes. And traders are just about beginning to err in the direction of “present me the cash” or else it’s time to transfer on.
Including to the considerations is growing scrutiny over OpenAI in the meanwhile. That’s particularly made difficult by their “frenemy” relationship with Nvidia. And making the information up to now week is that Nvidia shouldn’t be going to outright commit and pay up on their $100 billion partnership with OpenAI. As such, that has the potential to open up a complete new can of worms within the AI saga.
Placing apart the recognized unknowns, what’s market sentiment telling us based mostly on the charts?
Nasdaq Composite index each day chart
Effectively, it is a key second for the Nasdaq particularly because the drop yesterday ran to check the 100-day transferring common (crimson line) once more. That has been the place dip patrons have been drawing a line for the reason that finish of final 12 months in preserving the upside momentum working. However amid worth stalling nearer in the direction of 24,000, it’s elevating doubts about whether or not the newest rally has run out of steam.
If the rest, hold a watchful eye on the 100-day transferring common and if tech shares can maintain as much as hold above that. A agency break under might begin to set off stops and result in accelerated profit-taking, that particularly if accompanied by the suitable promoting triggers from any fault to the AI bubble.
For some context, the final time the Nasdaq traded above each key each day transferring averages and broke down under the 100-day transferring common was again in late February 2025. And through that fallout, the index dropped by over 22% earlier than the dip patrons ultimately put a cease to the entire rout in April 2025.
As a reminder although, that sharp selloff was largely as a result of main considerations surrounding Trump’s tariffs and ‘Liberation Day’. And everyone knows how that performed out in the long run. Obtained TACOs anybody?
