Shares of technology companies fell sharply, as a rotation out of mega-cap tech companies continued.
The SPDR Select Sector Technology exchange-traded fund, which tracks the tech industry group of the broad S&P 500, fell by 3%, slipping into the red for the year to date.
"The mega cap tech stocks have really been a big engine driver of the last three-to-four years, but that's broadening out to some of the industrial areas of the economy to financials and some consumer-related stocks," said Eric Marshall, president of Dallas mutual-fund firm Hodges Capital.
"I think that's really in response to an inflection in earnings growth rates." In recent years, the Magnificent Seven -- the seven largest U.S. tech stocks -- represented roughly half of all earnings growth for the S&P 500, Marshall said.
The small-cap stocks that comprise the Russell 2000 index, meanwhile, experienced an earnings recession, the strategist said.
"The inflation pressures of the last few years that really hurt small-company margins have moderated." A "more normalized rate environment" is also inspiring the rotation out of mega-cap tech stocks into small-cap companies, Marshall said.
Baseten, a startup specializing in AI inference, has raised $300 million at a $5 billion valuation, according to people familiar with the matter, more than doubling its valuation.
Anthropic Chief Executive Dario Amodei predicted a future in which artificial intelligence will spur significant economic growth, but could also lead to widespread unemployment and inequality.
Write to Rob Curran at rob.curran@dowjones.com
(END) Dow Jones Newswires
January 20, 2026 17:17 ET (22:17 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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