US Tech Stocks Sink to Multi-Month Lows as Economic Headwinds Intensify

The American stock market faced a significant correction this week, with US tech stocks bearing the brunt of selling pressure. The S&P 500 Index declined 1.30%, while the more technology-focused Nasdaq 100 fell 1.49%—the steepest single-day drop in 2.5 months. This latest pullback reflects growing investor anxiety around three critical factors: weakening labor market conditions, elevated capital expenditure guidance from mega-cap technology firms, and cooling momentum in the cryptocurrency space.

US tech stocks, which have dominated market gains throughout the recent bull run, are now showing vulnerability to multiple pressures simultaneously. The decline extends recent weakness, with major semiconductor companies leading the selloff and mega-cap technology firms forecasting spending levels that exceed Wall Street expectations, raising concerns about future profitability.

The Semiconductor Sector Collapses Amid Weak Guidance

Chip manufacturers became the primary casualty in the tech sector’s retreat. Qualcomm led semiconductor stocks lower, plunging more than 8% after guiding Q2 revenue to $10.2 billion to $11.0 billion, significantly below the consensus forecast of $11.18 billion. This disappointing outlook rippled across the entire chip supply chain, with Marvell Technology down 3%, and Advanced Micro Devices, NXP Semiconductors, and Western Digital each declining more than 2%.

The magnitude of Qualcomm’s miss reflects intensifying demand challenges in smartphone and data center markets. Investors are recalibrating their technology sector earnings expectations in response, particularly for companies dependent on cyclical semiconductor demand.

Magnificent Seven Stumbles Under Capex Burden

The seven largest technology stocks, collectively known as the Magnificent Seven, provided additional downward pressure on US tech stocks. Alphabet emerged as the biggest laggard within this group, sliding more than 4% after announcing full-year 2026 capital expenditure guidance of $175 billion to $185 billion. This projection substantially exceeds the consensus estimate of $119.5 billion, raising immediate concerns about free cash flow generation.

Amazon declined over 4%, while Microsoft and Tesla each fell more than 3%. The capital intensity signal from Alphabet—the largest component of this tech cohort—suggests that elevated spending on artificial intelligence infrastructure and data center development may persist longer than previously anticipated, potentially pressuring operating margins across the sector.

Labor Market Deterioration: The Broader Economic Drag

Beyond tech-specific issues, weakening US employment conditions are reverberating through the entire equity market. Challenger tracked 108,435 job cuts announced in January, representing a 117.8% year-over-year increase and the largest January reduction since the 2009 financial crisis. This alarming figure signals deteriorating corporate confidence and potential demand destruction ahead.

Corroborating this signal, initial unemployment claims surged by 22,000 during the latest reporting period to reach 231,000—an 8-week high that substantially exceeded the consensus expectation of 212,000. Simultaneously, the December JOLTS job openings index fell unexpectedly by 386,000 to 6.542 million, marking the lowest level in 5.25 years against expectations for an increase to 7.250 million.

This trifecta of labor market weakness is creating a genuine economic headwind. When job cuts accelerate, unemployment rises, and job openings contract in synchronization, it signals potential recession pressures—exactly the scenario that encourages equity investors to reduce risk exposure and rotate away from high-multiple technology stocks like those comprising US tech stocks.

Cryptocurrency Contagion and Valuation Unwind

Bitcoin descended more than 7% to a 1.25-year low as negative momentum cascaded through digital assets. The cryptocurrency has now surrendered approximately 45% of its gains from the October peak, a correction that reflects similar momentum dynamics affecting other risk assets.

Cryptocurrency-exposed stocks amplified these losses. MicroStrategy plummeted 12% to lead Nasdaq 100 decliners, while Marathon Digital and Coinbase Global dropped more than 10% and 8% respectively. The outflows from spot Bitcoin ETFs—totaling roughly $2 billion over the past month and exceeding $5 billion over the past three months according to Bloomberg data—demonstrate that institutional inflows have reversed sharply.

Earnings Provide Limited Support Despite Positive Performance

Despite the market selloff, earnings season is providing some counterbalance. Of the 237 S&P 500 companies that have reported through this period, 81% have beaten consensus expectations. Bloomberg Intelligence forecasts full-year 2026 Q4 earnings growth of 8.4%, representing the tenth consecutive quarter of year-over-year expansion. However, when the Magnificent Seven megacap technology stocks are excluded, earnings growth decelerates to just 4.6%—highlighting the significant growth concentration within the largest components of US tech stocks.

This disparity matters because the Magnificent Seven’s projected capital intensity means near-term earnings quality will likely deteriorate, potentially weighing on overall earnings growth acceleration over the coming quarters.

Treasury Markets Rally Amid Risk-Off Sentiment

The equity market’s weakness catalyzed a powerful safe-haven bid in government bonds. March 10-year Treasury note futures rallied to a 2.5-week high, pushing the 10-year yield down 6.2 basis points to 4.212%. The corresponding 10-year breakeven inflation rate fell to 2.318%, its lowest level in one week, indicating that inflation expectations are declining in tandem with growth concerns.

European government bonds moved in similar fashion. The 10-year German bund yield decreased 1.2 basis points to 2.848%, while the 10-year UK gilt yield contracted 0.8 basis points to 4.538%. These synchronized moves across developed markets reflect a universal reassessment of growth and inflation risks.

Global Stock Markets Mirror US Weakness

The selloff in US tech stocks proved contagious internationally. The Euro Stoxx 50 declined 1.19%, China’s Shanghai Composite fell 0.64%, and Japan’s Nikkei 225 index dropped 0.88%. This synchronized weakness indicates that the technology and growth concerns weighing on American equities are global in nature.

Economic data from overseas reinforced these concerns. Eurozone retail sales contracted 0.8% month-over-month in December, marking the largest decline in 2.25 years and exceeding expectations of a 0.4% contraction. However, German factory orders surged 7.8% month-over-month, offering a counterpoint and suggesting that underlying manufacturing sentiment remains resilient despite recent weakness.

Central Bank Positioning and Rate Cut Expectations

The European Central Bank maintained its deposit facility rate at 2.00% and acknowledged that “the economy remains resilient in a challenging global environment,” though it noted ongoing trade policy uncertainty. Meanwhile, the Bank of England held policy rates steady at 3.75% in a closely divided 5-4 vote.

Fed Governor Lisa Cook reaffirmed the Federal Reserve’s recent decision to maintain interest rates, emphasizing that risks remain “tilted toward higher inflation” and underlining the necessity to maintain credibility through a return to the disinflationary path. However, futures markets are now discounting approximately a 25% probability of a 25 basis point rate cut at the next policy meeting scheduled for March 17-18—a meaningful shift from prior expectations.

Individual Stock Performance and Earnings Surprises

Beyond broad sector trends, individual earnings reports generated significant moves. McKesson Corporation surged 16% after reporting adjusted EPS of $9.34, beating consensus of $9.27 and raising full-year guidance to $38.80-$39.20. Hershey Company climbed 7% on adjusted EPS of $1.71 versus consensus of $1.40 and strong forward guidance.

Conversely, several companies missed expectations. Estée Lauder plummeted 21% after guiding full-year adjusted EPS to $2.05-$2.25, substantially below consensus of $2.17. Fluence Energy crashed 24% following an adjusted EBITDA loss of $52.1 million, nearly double the consensus loss estimate of $27.1 million.

The Week Ahead: Sentiment and Macro Focus

The market will focus heavily on the University of Michigan’s January consumer sentiment survey, expected to decline 1.4 points to 55.0—a reading that would confirm consumer anxiety amid labor market deterioration. With 150 S&P 500 companies scheduled to report earnings during the remainder of this week, the earnings calendar will compete for attention alongside economic data.

The trajectory of US tech stocks remains contingent on whether labor market signals genuinely indicate early-stage recession pressures or represent temporary seasonal distortions. If the former, the elevated valuations and capital intensity forecasts from technology leaders will face additional downward pressure. If the latter, the strong earnings growth narrative combined with potential Fed easing could stabilize sentiment and support a rebound in depressed technology valuations.