US Stock Markets Mixed February 3, 2026: Tech Weakness Triggers Sector Rotation as Defensive Stocks Rally

The trading session on February 3, 2026, showcased a classic risk-off rotation pattern, with technology stocks bearing the brunt of selling pressure while defensive and commodity-linked sectors attracted capital flows. This divergence reflects investor reassessment of AI-related valuations ahead of critical earnings reports from mega-cap technology companies later in the week. The market’s sector rotation dynamics were evident across multiple dimensions, from individual stock movements to index-level performance [0][1].

The technology sector’s decline of

represented the worst-performing sector of the day, driven primarily by weakness in AI-adjacent companies and enterprise software names. This sector-specific pressure contrasted sharply with the sector’s gain of , advance of , and rise of . The magnitude of this sector rotation—spanning nearly 450 basis points between the best and worst-performing sectors—signals meaningful repositioning by institutional investors [0].

The performance differential between major indices highlights the concentrated nature of recent market gains and the sector rotation dynamic at play:

Index	Daily Change	Closing Level	Relative Performance
Dow Jones Industrial	-0.29%	49,215.09	Most resilient
S&P 500	-1.01%	6,914.59	Below 50-day MA
Nasdaq Composite	-1.91%	23,214.55	Largest decline
Russell 2000	-0.64%	2,631.27	Moderate weakness

The Nasdaq’s -1.91% decline versus the Dow’s modest -0.29% move illustrates how the technology-heavy weighting of growth-oriented indices amplifies sector-specific weakness. The Dow’s diversified composition—including significant healthcare, consumer goods, and industrial exposure—provided a stabilizing effect that limited index-level losses [0].

The S&P 500’s decline to

represents a technically significant development, as the index breached below the 50-day moving average at . This technical level often serves as a short-term trend indicator, and its breach suggests potential for continued volatility. The index is now testing whether this breakdown triggers further selling pressure or proves a false breakdown that attracts buying interest [1][0].

The S&P 500’s record high of

remains significant resistance, while the uptrend line at represents a secondary technical barrier. The failure to hold the 50-day moving average is particularly noteworthy given the index’s recent attempt to establish new highs. Market participants should monitor the as critical support, with a potential breakdown below this zone suggesting a more significant correction [0].

Nvidia (NVDA) experienced pronounced selling pressure, declining

on heavy volume of 97.37 million shares. The stock has now declined for four consecutive sessions, eroding recent gains and reflecting growing investor skepticism about AI investment returns. Microsoft (MSFT) similarly faced sustained pressure, falling to close at $411.53, also marking its fourth consecutive session of declines [0].

Software stocks suffered disproportionately during the session, with ServiceNow falling approximately 7% and Salesforce declining around 5%. This weakness extends beyond hardware and GPU names to include enterprise software companies, potentially indicating broader concerns about enterprise IT spending priorities and the timeline for AI monetization across the technology ecosystem [1].

Merck (MRK) emerged as a standout performer, rallying

to $116.06 on volume of 11.31 million shares. The stock has demonstrated remarkable strength over the past week, gaining over 7% across four consecutive positive sessions. This performance is attributed to strong earnings results that provide evidence healthcare and pharmaceutical companies continue to deliver reliable results amid broader market uncertainty [1][0].

PepsiCo (PEP) contributed to Dow strength with a +4% gain, while Palantir (PLTR) rallied +6% following upbeat guidance. These gains in consumer staples and select technology names illustrate the bifurcation within equity markets, with defensive positioning gaining traction even as select growth companies with strong fundamentals attract buying interest [1].

The rotation from growth to value, and from technology to defensive sectors, reflects several converging factors: concerns about AI investment returns, elevated valuations in the technology sector, and the approaching earnings season that will provide fundamental clarity on company prospects. The strength in materials (+2.96% according to FX Empire) aligns with a flight to tangible assets amid commodity price rebounds in gold and silver [1].

This rotation pattern indicates investors are de-risking exposure ahead of high-stakes earnings reports from Alphabet (GOOGL) and Amazon (AMZN). These reports will provide critical insight into digital advertising trends, cloud computing performance, AI integration progress, and the broader sustainability of AI-driven valuations that have supported technology sector gains [1][0].

: AI investment returns remain under scrutiny, with the sector-wide repricing risk considered high. The concentrated nature of gains in mega-cap technology companies means that negative surprises in upcoming earnings could trigger broader market weakness [0].

: The S&P 500’s breakdown below the 50-day moving average represents a medium-level technical risk, potentially signaling a trend reversal. The breach of this widely-watched support level could trigger algorithmic selling and technical momentum strategies [0].

: Upcoming Alphabet and Amazon reports present medium-to-high near-term volatility potential. These reports will clarify AI demand sustainability and provide guidance that could either validate or challenge current technology sector valuations [1].

: The S&P 500 and Nasdaq’s significant technology weight means that sector-specific weakness continues to exert outsized influence on index performance. This concentration may persist until broader sector participation improves [0].

: Healthcare and consumer staples earnings are providing stability, with companies like Merck demonstrating that fundamental performance can drive stock appreciation regardless of broader market conditions. These sectors may offer relative shelter during periods of technology weakness [0].

: Markets are pricing two potential rate cuts, with economic resilience supporting this expectation. Lower interest rates could provide liquidity support and reduce discount rates applied to growth-oriented equities [0].

: Materials and precious metals strength indicates alternative asset demand, potentially providing opportunities in commodity-sensitive sectors and mining companies [1].

The upcoming earnings reports from Alphabet (scheduled this week) and Amazon represent high-urgency catalysts that will significantly influence market direction. These reports will provide the fundamental clarity investors are seeking regarding AI demand sustainability and enterprise technology spending priorities. Market volatility is likely to remain elevated until this uncertainty is resolved [1].

The February 3, 2026, trading session revealed meaningful sector rotation dynamics as investors reposition ahead of critical technology earnings reports. Key technical indicators show the S&P 500 trading below the 50-day moving average at 6,914.59, with the 6,900 level serving as critical support. Technology sector weakness, led by declines in Nvidia (-3.56%) and Microsoft (-2.48%), contrasted with defensive sector strength in Consumer Defensive (+2.17%) and Healthcare names like Merck (+3.93%). The Dow’s relative resilience versus the Nasdaq highlights index-specific exposure to technology sector volatility [0][1].

The market is monitoring several key catalysts: Alphabet and Amazon earnings that will provide AI demand clarity, Federal Reserve commentary on interest rate policy that could impact growth stock valuations, and the response of major indices to technical support level tests. Historical patterns suggest that sector rotation events often precede either broader market corrections or sector rebalancing that eventually stabilizes indices [1][0].

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This analysis integrates quantitative market data [0] from internal analytical systems and the FX Empire report [1] published on February 3, 2026.