Tech sector needs to answer one ‘big question’

Yahoo Finance Video and Julie Hyman

Tue, February 10, 2026 at 9:00 PM GMT+9

In this video:

^IXIC

+0.90%

IGV

+3.15%

MAGS

+1.16%

^DJI

+0.04%

^GSPC

+0.47%

Longview Economics global economist and chief market strategist Chris Watling joins Market Catalysts host Julie Hyman to discuss the sell-off in software stocks (IGV) and what it means for the tech sector (XLK) and the broader market (^DJI, ^GSPC, ^IXIC).

To watch more expert insights and analysis on the latest market action, check out more Market Catalysts.

Video Transcript

00:00 Speaker A

So, it had, it was a strange week, right? With that sort of volatility that we saw.

00:05 Speaker A

Then we saw a very sharp bounce back on Friday.

00:09 Speaker A

But where does that leave us now, right? Given that, you know, volatility, does it mean, doesn’t feel like everything’s just magically okay.

00:15 Speaker B

Yeah, it was it was it was extraordinary, wasn’t it? I mean, the software stocks sold sold off so hard in the past two weeks until Thursday and then bounced hard on Friday.

00:24 Speaker B

They were deeply oversold on Thursday. I mean, really deeply oversold. So, I I think I don’t think you want to you want to read too much into one day’s move when you’re deeply oversold.

00:32 Speaker B

I think really when you stand back from it and you look at the S&P 500 and the Nasdaq, they’ve basically gone sideways since October.

00:39 Speaker B

They’ve been range bound now for three, four, five months. And what’s interesting is within that sideways move, they’ve been rotating a lot.

00:47 Speaker B

We and as you mentioned, the Dow at 50,000, cyclicals are are taking up the running. The Mag 7 under pressure as you touched on.

00:54 Speaker B

So they’re underperforming now. And of course, everyone was everyone was super long the Mag 7 into October last year. Everyone was super excited about AI, you remember September,

01:04 Speaker B

things were surging like Oracle and TSMC and all that sort of stuff. And now I think we’re thinking, well, hold on, there’s a cyclical recovery coming. I need a bit of classic cyclical exposure as well as some exposure to all that AI CAPEX that creates, you know, supply bottlenecks somewhere.

01:21 Speaker B

down the chain. the guys down the food chain, um who who make, you know, the nuts and bolts and the old economy stuff that’s important for data centers and so on.

01:31 Speaker B

So, so I think we’re seeing that. I think the market’s rotating within a sideways range and uh more cyclical parts are taking up the running. And the real question is what’s happened to tech? Is it, is it off or is it going to come back? I think that’s really the big question you have to answer.

01:45 Speaker A

And what’s your answer to that question?

01:49 Speaker B

Yeah, I thought you yeah. Um, I I I I’m I think it’ll come back. The market’s clearly getting nervous though about people that are spending too much on CAPEX that don’t have the cash flow.

02:03 Speaker B

And Amazon I think was a great example of that last week. So, I think the market’s becoming more discerning, but I think the market in aggregate is still going to go up because I mean it looks like the estimates are AI CAPEX spend will add about 1 and 1/2% to GDP growth in 2026.

02:16 Speaker B

That’s a big number. That’s a really big number and that has a lot of multiplier effects. Um, so, yeah, I mean, I’m not a stock uh guy, single stock guy, so I I don’t pick single stocks.

02:29 Speaker B

I I would buy software for a bounce. I wouldn’t know whether you should keep buying it. Maybe Microsoft, I don’t know.

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