LIVE MARKETS-US stocks stumble as tech tumbles

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US STOCKS STUMBLE AS TECH TUMBLES

U.S. stocks fell on Tuesday, with the Nasdaq .IXIC and S&P 500 .SPX weighed down heavily by a drop in technology stocks, and more specifically, software-related names, over concerns about competition from AI companies.

Investors have become more discerning when it comes to spending by companies towards AI, looking for earnings to justify the massive expenditures. Microsoft MSFT.O shares plunged last week while Meta Platforms META.O rallied following its quarterly results. Investors will get a look at earnings from AI peers Alphabet GOOGL.O and Amazon.com AMZN.O later this week.

While the S&P 500 tech sector .SPLRCT dropped more than 2% as the worst performing of the 11 major sectors on the session, the S&P 500 software and services index .SPLRCIS dropped for a fifth straight session and is down 12.8% over that timeframe, its biggest five-day percentage tumble since March 2020.

Along with software companies, U.S. and European data analytics and professional services stocks also plunged, as worries about plug-ins released by AI developer Anthropic for its Claude Cowork fueled fears about disruption and additional competition in the spaces.

Britain's RELX REL.L and the Netherlands’ Wolters Kluwer WLSNc.AS, both providers of legal analytics, plummeted more than 10% while Toronto‑based Thomson Reuters TRI.TO, which owns the Westlaw legal database, saw a decline of nearly 16% in both its Canadian and U.S.-listed shares.

"The selling pressure in software and data analytics reflects a deepening structural debate, accelerated today by Anthropic’s legal automation tool challenging incumbents like RELX," said Jonathan McMullan, global sector specialist, technology, global and international equities at Schroders. "Investors are aggressively repricing these areas as the historical ‘visibility premium’ erodes; the speed of AI advancement makes long-term valuations harder to defend, particularly as AI tools allow businesses to do more with fewer staff, threatening the traditional model of charging per software user."

Despite the broad selling pressure, small caps managed to buck the trend, continuing their recent streak of outperforming their large-cap brethren. The Russell 2000 .RUT managed to recover from declines to close with a 0.3% gain, although the S&P 600 .SPCY shed 0.09%.

Below is your closing market snapshot:

(Chuck Mikolajczak/ Lucy Raitano)

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