Nasdaq Index: Tech Stocks Plunge as Software Sector Enters Bear Market Today

• Microsoft's weak guidance on fiscal Q3 operating margins and slowing Q2 cloud growth sparked investor exodus, pressuring other 'Magnificent Seven' and AI-related stocks including Nvidia and AMD
• The software sector ETF dropped 22% below recent peaks, officially entering bear market territory amid heightened investor focus on forward guidance rather than historical results
• Nasdaq technical breakdown sees index falling from near-record highs to test 50-day moving average at 23,312; recovery above 23,962 needed to restore uptrend, otherwise further decline likely

Market Summary: Tech Sector Selloff Driven by Microsoft Weakness

Key Market Movements

U.S. equity markets declined sharply at mid-session on Thursday, January 29, 2026, with the Nasdaq Composite down 1.62% to 23,472, the S&P 500 falling 0.94% to 6,912, and the Dow Jones dropping 0.48% to 48,780. The software sector ETF officially entered bear market territory, plunging 22% below recent highs.

Microsoft Triggers Selloff

Microsoft (MSFT) led the decline with a 12% drop, marking its worst single-session performance since March 2020. The selloff was triggered by disappointing guidance on operating margins for fiscal Q3 and slowing cloud growth in fiscal Q2. As a component of all three major indices and member of the "Magnificent Seven," Microsoft's decline had outsized market impact.

Sector Contagion

The weakness spread to AI-related stocks as investor sentiment deteriorated. The market demonstrated a clear shift toward future-focused trading, with investors quickly exiting positions showing disappointing forward guidance rather than tolerating uncertainty.

Technical Analysis

The Nasdaq tested critical support at its 50-day moving average of 23,312, dropping sharply from near-record highs just one day prior. Analysts warn the index remains vulnerable without recovering the uptrend line at 23,962.

Bright Spots

Meta surged 7% on stronger-than-expected Q1 sales guidance, and Caterpillar rose over 1%, providing limited offset to broader tech weakness.

Market Outlook

Attention turned to Apple's after-hours earnings report, with heightened expectations for "blowout" numbers to restore confidence. The current environment reflects minimal tolerance for disappointing guidance as investors actively rotate toward stocks offering superior future returns.