Wall Street Tumbles Amid Weak Labor Data and Mounting AI Sector Worries
U.S. stocks extended their decline on Friday, dragged down by disappointing labor market figures and escalating concerns over the artificial intelligence sector, as major indices like the S&P 500 and Dow Jones posted fresh losses.[1][2]
The benchmark S&P 500, tracked by the US500 index, slipped to 6790 points, marking a 0.12% drop from the prior session. This followed a steeper 0.84% plunge to 6825 points on Thursday, contributing to a 1.73% loss over the past month despite remaining 12.19% higher year-over-year.[1]
Labor Market Signals Raise Recession Fears
Weak employment data emerged as a key driver of the selloff. U.S. job openings unexpectedly fell in December to their lowest level since 2020, while January job cuts rose compared to a year earlier, signaling strains in what had been a resilient economy.[2]
These figures, highlighted in market commentary, painted a picture of deteriorating labor conditions. “The ballast of the strong economy is also starting to show some strains,” noted analysts during Bloomberg Television’s coverage, pointing to the sharp drop in openings as a red flag for broader economic health.[2]
The Russell 2000, representing small-cap stocks, also weakened, falling to 2589.00 index points—its lowest since January 2026—after a 1.26% decline to 2590.22 on Thursday. Despite a modest 0.36% gain over the past four weeks, it has risen 12.36% over 12 months.[1]
Tech and AI Selloff Deepens
The technology sector bore the brunt of the downturn, with a deepening software selloff amplifying investor unease. The Dow Jones Industrial Average opened 0.58% lower, shedding 286 points, led by heavyweights like Amazon (-3.84%), Microsoft (-3.22%), and Salesforce (-2.67%).[1]
Microsoft faced particular pressure after C4 cut its price target to $392—the second-most bearish on the Street—citing overly optimistic consensus estimates for future growth.[2] AI-related stocks had their worst day since April, as momentum turned against the market. Over 50% of Nasdaq 100 names traded below their 100-day moving average for the first time since late November, a level indicating deteriorating sentiment.[2]
Broader Market Dynamics and Bitcoin Rout
Unlike the prior two days, a majority of stocks rose on Friday, but the S&P hovered around 6800 amid persistent red in key sectors.[2] Long-duration assets echoed early November lows, with continued unwinding of leverage evident in negative funding rates for Bitcoin perpetual futures. Bitcoin erased all gains from the post-Trump election “bump,” extending a rout alongside Asian stocks and tech.[2]
While defensive names provided some support—Merck (+2.62%), Travelers Companies (+1.62%), and Amgen (+1.59%) led gains—the overall mood soured.[1] The Nasdaq’s momentum shift underscored how AI hype, once a market buoy, now fuels volatility as earnings expectations reset lower.
Investor Sentiment Shifts
Market watchers pointed to a confluence of factors: softening labor data challenging the narrative of a soft landing, coupled with AI overvaluation fears. “Sentiment is indeed deteriorating,” Bloomberg’s Romaine observed, as the percentage of advancing stocks failed to offset mega-cap tech losses.[2]
Over the past month, the S&P 500’s 1.73% retreat reflects profit-taking after a strong yearly performance. Small caps in the Russell 2000, more sensitive to domestic economic shifts, signal caution ahead.[1]
“U.S. job openings unexpectedly fell in December to the lowest since 2020, while job cuts in January rose from a year earlier.”
Bloomberg Television, February 6, 2026[2]
Outlook and Global Ripples
The selloff rippled globally, with Asian markets falling as the tech and Bitcoin rout extended. Investors now eye upcoming economic releases for clues on Federal Reserve policy, with labor weakness potentially paving the way for rate cuts but also stoking recession worries.
Despite Friday’s modest daily dip, the session highlighted fragility: a market where majority gains couldn’t prevent index losses, driven by outsized influence from tech giants.[2] As AI enthusiasm cools, traditional economic indicators regain sway.
Gains in healthcare and insurance offered pockets of resilience, but the narrative remains one of caution. With the US500 at 6819.86 intraday lows, traders brace for weekend digestion of the data.[1]
Key Index Snapshot
| Index | Latest | Change | % Change | Monthly | Yearly | Date |
|---|---|---|---|---|---|---|
| US500 | 6790 | -0.12% | – | -1.73% | +12.19% | Feb 6, 2026 |
| Dow Jones | – | -286 pts | -0.58% | – | – | Feb 6 Open |
| US2000 | 2589 | -32.95 | -1.26% | +0.36% | +12.36% | Feb 5 |
This snapshot underscores the mixed but downward-leaning performance across benchmarks.[1]
Wall Street’s Friday fade serves as a reminder that even in bullish yearly contexts, short-term shocks from labor data and sector-specific AI jitters can dominate. Markets will reconvene next week with heightened scrutiny on employment trends and tech earnings revisions.
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