S&P 500 Goes Negative for 2026 as Tech Rout Deepens
Dow sheds 593 points, Nasdaq falls 1.6%, and S&P 500 erases year-to-date gains as AI spending fears and Amazon's after-hours plunge fuel the selloff.
The S&P 500 is now in the red for 2026. It took five weeks.
Thursday's session delivered the worst day for US equities since early December, with the Dow shedding 593 points (1.2%) to close at 48,909. The S&P 500 dropped 1.23% to 6,798—below where it started the year. The Nasdaq Composite fell 1.6% to 22,541, extending its loss from the January 27 high to over 4%.
And then Amazon reported after the bell. The stock dropped another 7% in after-hours trading on a $200 billion capex plan, signaling Friday's open could add to the damage.
Three Days, One Theme
This week's selloff has a clear through-line: the market is re-evaluating what $600 billion in collective AI infrastructure spending means for big tech earnings.
It started Tuesday when Alphabet guided capex to $175-185 billion, roughly double 2025 levels and $55 billion above consensus. The stock initially fell 5% before partially recovering. On Wednesday, AMD's cautious guidance triggered a semiconductor rout that took the SOX index down to its worst session since September. Thursday brought the broadest damage yet.
Consumer discretionary led declines at -2.1%, followed by communication services at -1.8% and technology at -1.5%. Only utilities (+0.3%) and consumer staples (+0.1%) finished green—textbook defensive rotation.
The Rotation Accelerates
What makes this selloff distinctive is the speed of the rotation. The equal-weighted S&P 500 has outperformed the cap-weighted index by 3.2 percentage points over the past five sessions. That's the widest divergence since the post-DeepSeek selloff in late January 2025.
Money is leaving the Magnificent Seven and flowing into value, dividend payers, and defensives. The Dow has held up better than the Nasdaq in every session this week—Thursday's 1.2% decline compares to the Nasdaq's 1.6%—because it's more heavily weighted toward industrials, healthcare, and financials that benefit from rate stability and aren't directly exposed to AI capex anxiety.
The SaaS sector implosion continues in the background. The S&P software and services index has now lost roughly $1 trillion in market value since January 28, as AI disruption fears compound the broader tech selloff.
Credit Market Signals
Bond yields actually fell on Thursday, with the 10-year Treasury dipping to 4.33%. That's a relief for equity markets—if yields were rising simultaneously, the selloff would be far more concerning. Instead, this looks like a growth scare confined to the tech sector rather than a systemic risk-off event.
The VIX climbed to 18.7, elevated but not panicked. For context, the VIX hit 27 during the DeepSeek selloff and 38 during the August 2024 yen carry trade unwind. The current level suggests hedging demand is increasing but institutional positioning hasn't capitulated.
What Friday Brings
Friday's premarket will be dominated by Amazon's after-hours reaction and the January jobs report. Weak ADP private payroll data on Wednesday—just 22,000 jobs added versus 40,000 expected—has set expectations low for nonfarm payrolls. A soft print could paradoxically help equities by reinforcing rate-cut expectations. A hot number would compound the pain.
The S&P 500's 200-day moving average sits around 6,650, about 2% below current levels. That's the line in the sand for the broader market. Every pullback to that level in 2025 was a buying opportunity. Whether that pattern holds depends on whether this is just a healthy correction in an overextended trade or the beginning of a genuine leadership rotation that lasts months.
Nasdaq futures were down another 0.4% heading into Friday's session. With Amazon poised to open roughly $20 lower and the jobs report due at 8:30 a.m., the first hour of trading Friday could set the tone for the rest of February.