MARKET RECAP – 2/3/26
U.S. stocks sold off sharply today as software names got obliterated by AI disruption fears, triggering the sector’s worst single-day selloff in years and dragging tech giants lower with them. The release of Anthropic’s Claude 5 AI model with advanced legal automation capabilities sparked panic across data services, enterprise software, and related sectors — reinforcing the view that AI may displace traditional software subscriptions faster than anyone expected.
The S&P 500 fell 0.84% to close at 6,917.81, while the Nasdaq tanked 1.43%, settling at 23,255.19. The Dow held up better, dipping just 166.67 points or 0.34% to end at 49,240.99 — and actually touched a new intraday record early in the session before reversing. The Russell 2000 showed relative strength, holding near flat on the day. The VIX spiked to 17.01, up 8.88%, signaling rising caution across the market.
Software stocks were massacred. ServiceNow plunged 7%, Salesforce dropped nearly 7%, Gartner lost a quarter of its market value, FactSet and S&P Global both got hit hard, and Accenture fell sharply. The carnage spread into adjacent sectors — enterprise SaaS names like HubSpot, ServiceTitan, Atlassian, DocuSign, Asana, PagerDuty, Workday, and Adobe all hit 52-week lows. The iShares Software ETF dropped another 5% today, bringing its year-to-date loss to 20%.
The AI disruption thesis is no longer theoretical — it’s happening in real time. Anthropic’s new Claude 5 model showcased legal document analysis and automation that replaces entire categories of enterprise software workflows. If AI can draft contracts, analyze case law, and handle compliance tasks that traditionally required expensive SaaS platforms, those subscription models are toast. Investors are repricing the entire software sector to account for this existential threat.
The damage wasn’t limited to software. Private credit and alternative asset managers with heavy exposure to levered software companies got hammered. Blue Owl, TPG, Ares Management, and KKR all dropped double digits, while Apollo Global lost 7% and BlackRock shed 5%. These firms hold billions in loans to software companies whose business models are now under scrutiny.
Mega-cap tech fared poorly as well. Microsoft fell by more than 2%, Meta dropped by more than 2%, and Apple slipped marginally. NVIDIA slumped nearly 3% as the AI bellwether added to its 2026 losses. Despite beating earnings estimates last night, sentiment around AI infrastructure spending remains shaky following Microsoft’s cloud miss last week.
On the flip side, Palantir surged 6% after its blowout earnings report and guidance that crushed expectations. The company’s 2026 revenue outlook implies 61% growth, versus Wall Street’s 43% estimate, underscoring demand for AI-native platforms even as legacy software burns.
Geopolitical tensions flared as the U.S. Navy shot down an Iranian drone headed toward an aircraft carrier in the Arabian Sea, adding a risk-off tone to the afternoon session. Oil prices stayed relatively stable despite the news, though energy volatility ticked higher.
Gold bounced modestly to around $4,745, recovering some ground after Friday’s historic 11% crash. Silver steadied around $96 after its record 31% single-day plunge on Friday. Bitcoin hovered around $78,000, still down sharply from its October highs above $126,000.
After the bell, AMD missed Q4 earnings — the last major chip name to print this earnings season. Expectations are high: $1.11 EPS on $9.6 billion revenue, representing 26% earnings growth. The stock is down about $16 in after-hours.
The AMD print isn’t helping SMH or QQQ in the aftermarket, so expect a possible tough tech opening tomorrow.
Fear & Greed Index at 62 (Greed), though today’s software carnage suggests that confidence is fragile. The market is bifurcating — AI infrastructure plays like chips and cloud platforms are holding up, while traditional enterprise software is getting repriced for obsolescence.
Tomorrow brings ADP jobs data, ISM Services PMI, and earnings from Alphabet and Amazon — the last two mega-cap hyperscalers to report. Cloud growth and AI capex spending will be under the microscope following Microsoft’s stumble. If Alphabet or Amazon disappoints, this selloff accelerates.
See you in the morning.