By Connor Smith

S&P 493. A wave of selling in technology stocks overshadowed an otherwise decent day on Wall Street.

The Nasdaq Composite dropped 1%. The S&P 500 fell 0.5%. The Dow Jones Industrial Average fell 42 points, or 0.1%.

At the center of the slide were the so-called Magnificent Seven stocks. Cue the sardonic one-liners.

All of the Mag 7 stocks closed lower, and only Alphabet and Apple were down less than 1%. Nvidia dropped 1.4%; Tesla dropped 1.8%; Microsoft, Amazon.com, and Meta Platforms were all down at least 2.4%. Together, the Roundhill Magnificent Seven ETF fell 1.5%.

Mizuho's Daniel O'Regan titled a Wednesday afternoon note: "Return of the S&P 493?"

About 320 stocks in the S&P 500 closed higher, lifting the Invesco S&P 500 Equal Weight ETF, or RSP, up 0.5%. The RSP ETF counts every individual stock the same, so Nvidia has the same pull as LyondellBasell Industries. Good thing, because LyondellBasell rallied 6.8%.

"We are currently seeing one of the biggest broadening--out days in months," O'Regan wrote.

The stock market was in rotation mode, with small-cap, dividend, value, and low volatility focused exchange-traded funds the beneficiaries. The Russell 2000 rose 0.7% to mark its fourth closing high of the year. It's risen in seven of the past nine trading days.

Momentum, growth, and risk-focused ETFs got crushed. So did software. More on that below.

Jonathan Krinsky, BTIG's chief market technician, points out the S&P 500's troubles began right around the time the index neared the 7000 level.

"The big round 7k number, at least initially, is providing some turbulence for the S&P 500," Krinsky writes. "The weakness in tech, and particularly software is palpable. Further, banks are failing to hurdle the high bar they set for themselves coming into this week."

Bank earnings continue tomorrow with results from BlackRock, Goldman Sachs, and Morgan Stanley.

The Hot Stock: LyondellBasell Industries +6.8% The Biggest Loser: AppLovin -7.6%

Best Sector: Energy +2.3% Worst Sector: Consumer Discretionary -1.8%

Software Slump

It wasn't just Big Tech that took a beating on Wednesday: A selloff in software stocks entered its second day.

The iShares Expanded Tech-Software Sector ETF fell 2.2%. AppLovin, Intuit, and Aptiv were the three worst performers in the S&P 500. Salesforce, Workday, and Atlassian also continued recent struggles.

As Jefferies software analyst Brent Thill told Barron's Adam Levine: "Software is sucking wind." Adam writes:

The brewing narrative is that artificial-intelligence coding tools will drain the moats that these companies have worked so hard to fill over the past decades. AI coders are already providing advanced capabilities, and they will only improve with time.

Investors are betting that at some point companies will be able to make their own customized versions of these applications at a lower cost, bypassing software subscriptions.

The immediate catalyst for Tuesday's selloff was the release of a new AI-agent called Cowork from AI start-up Anthropic. Agents are software that can automate a complex series of tasks from a simple prompt. Anthropic has already had success with its coding agent, Claude Code, and hopes to bring that sort of tool to a more general audience. Cowork's launch demos were rudimentary, but it isn't hard to see where these things could go, replacing software functions and making some of them obsolete.

If AI chat becomes the primary interface for using software as many people imagine will happen, developers may need to rethink what software looks like and how it is delivered in that new world. It could look more like Cowork than today's graphical interfaces.

Like any trend, there will be winners and losers. Right now, Wall Street seems more worried about avoiding losers.

You can read the full story from Adam's here.

The Calendar

BlackRock, Goldman Sachs, J.B. Hunt Transport Services, Morgan Stanley, and Taiwan Semiconductor Manufacturing report earnings tomorrow.

What We're Reading Today

   -- Trump's Housing Plan Is Wild Card for Builder Stocks. It Isn't Just About 
      Buybacks. 
 
   -- Trump Puts 25% Tariffs on Chips. It Only Matters to Nvidia and AMD -- for 
      Now. 
 
   -- 5 Signals From the Fed's Beige Book That Explain the Economy Right Now 
 
   -- Who's Paying to Keep Coal Plants Alive? All Electricity Customers, Trump 
      Advisor Says. 
 
   -- Tech Spending Is Still Strong. There's 1 Big Winner and Plenty of Losers. 

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January 14, 2026 20:08 ET (01:08 GMT)

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