It was a poor day for US equities typically, 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 fascinating in regards to the selloff yesterday is how tech-heavy they had been for probably the most half. Tech shares dragged down the S&P 500 even when greater than half of the shares within the index ended increased on the day. That speaks to the weightage but in addition how maybe there may be some rotational play taking place in Wall Avenue.
S&P 500 shares heatmap (3 February 2026)
The continued narrative because the flip of the yr is that there are considerations that AI valuations have stretched out too far. It’s about time for tech corporations and people investing closely in AI to ship some outcomes. And buyers 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 rising scrutiny over OpenAI in the intervening time. That’s particularly made difficult by their “frenemy” relationship with Nvidia. And making the information prior to now week is that Nvidia will not be going to outright commit and pay up on their $100 billion partnership with OpenAI. As such, that has the potential to open up an entire 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 every day chart
Nicely, 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 consumers have been drawing a line because the finish of final yr in holding the upside momentum operating. However amid worth stalling nearer in the direction of 24,000, it’s elevating doubts about whether or not the most recent 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 beneath might begin to set off stops and result in accelerated profit-taking, that particularly if accompanied by the fitting promoting triggers from any fault to the AI bubble.
For some context, the final time the Nasdaq traded above each key every day transferring averages and broke down beneath 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 consumers ultimately put a cease to the entire rout in April 2025.
As a reminder although, that sharp selloff was largely resulting from main considerations surrounding Trump’s tariffs and ‘Liberation Day’. And everyone knows how that performed out in the long run. Bought TACOs anybody?
