S&P 500, Nasdaq Decline as Microsoft Earnings Weigh on Tech Sector

Feb 2, 2026, 2:26 AM

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US stocks experienced a downturn on Thursday, primarily driven by a significant drop in the tech sector. The Nasdaq Composite index fell approximately 0.7%, while the S&P 500 decreased by 0.2%. This decline was largely attributed to a dramatic fall in Microsoft (MSFT) shares, which plummeted over 10% following the company's earnings report that raised concerns about rising capital expenditures and a slowdown in cloud sales growth.

Microsoft's disappointing performance overshadowed other tech earnings, including that of Meta (META), which saw its shares rise over 10% due to a robust revenue outlook and plans to invest heavily in its data center infrastructure. However, the overall tech landscape was marred by investor anxiety regarding artificial intelligence (AI) spending trends and the implications of Microsoft's results on the sector's growth potential.

Tesla (TSLA) also contributed to the tech sector's woes, as its shares declined by more than 3%. The company reported a quarterly earnings beat but indicated a strategic shift away from electric vehicles (EVs) towards robotics, which unsettled investors. Furthermore, Tesla marked its first annual revenue decline, adding to the uncertainty in the tech market as traders prepared for Apple’s (AAPL) upcoming earnings report, set to be released after the market closed.

In addition to the tech sector's struggles, Wall Street was navigating broader economic concerns. Tensions between the United States and Iran escalated, with President Trump's warning to Iran regarding a nuclear deal, further complicating the market atmosphere. This geopolitical turmoil led to a rise in crude oil prices, with Brent crude exceeding $70 per barrel as US ships were reported gathering in the region.

The Federal Reserve's monetary policy decisions also played a crucial role in shaping market sentiment. The central bank opted to keep interest rates unchanged, but markets are bracing for potential rate cuts later in the year, which could influence investment strategies moving forward. Speculation is increasing regarding Trump’s forthcoming announcement about the next Fed chair, which could have significant implications for monetary policy in the coming months.

As earnings season progresses, analysts are watching closely for results from other tech giants, including Alphabet (GOOG, GOOGL), Amazon (AMZN), and AMD (AMD), with expectations of continued earnings growth across the S&P 500. Currently, analysts anticipate an 11.9% increase in earnings per share for the fourth quarter, which if realized, would mark the tenth consecutive quarter of annual earnings growth for the index.

The mixed results from tech companies highlight an ongoing trend of fluctuating investor sentiment, with many firms experiencing varying degrees of success in their earnings reports. While Meta's strong performance was a bright spot, the overall tech sector's response to Microsoft’s earnings has raised questions about sustainability in the growth narrative for the coming year.

As the market closes, all eyes are on Apple and its earnings report, which could either bolster investor confidence or further exacerbate the current downturn in tech stocks. The upcoming results are critical as they may set the tone for the tech sector's performance in 2026, amid increasing competition and evolving market dynamics in the AI space.

In summary, Thursday’s trading session illustrated the fragility of the tech sector, with Microsoft’s earnings serving as a wake-up call for investors. With significant earnings announcements on the horizon, market participants are poised to react swiftly to new information that could shape the economic landscape in the months ahead.

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