US shares fell on Thursday. The Dow dropped 555 points (1.1%), the S&P 500 fell 1.2%, and the Nasdaq slid 1.7% as losses spread beyond large technology stocks.
Apple and Amazon each fell about 3%. AppLovin dropped more than 4% despite beating fourth-quarter expectations, and is down about one-third over the first six weeks of 2026.
Rotation Beyond Big Tech
Walmart rose 3% and Boeing gained 2% as money moved into more cyclical areas. Cisco fell about 7% after reporting revenue of $15.35 billion and adjusted EPS of $1.04, while non-GAAP gross margin was 67.5% versus a 68.1% estimate.
Cisco lifted full-year revenue guidance from $61.2 billion to $61.7 billion, below a $62.1 billion target. McDonald’s edged lower after adjusted EPS of $3.12 on revenue of $7.01 billion, with US comparable sales up 6.8%.
Existing home sales fell 8.4% in January to 3.91 million, below 4.15 million. The median price rose 0.9% to $396,800 for a 31st straight annual rise, while initial jobless claims were 227K and continuing claims 1.862 million.
January nonfarm payrolls showed 130K jobs versus 55K expected. The Fed held rates at 3.50–3.75%, markets price about two cuts in 2026, and headline CPI is seen at 2.5% year-on-year.
The broad market selloff, led by technology, signals that we should be positioning for further downside in growth-oriented stocks. This rotation away from tech is accelerating, making it wise to consider purchasing put options on the Nasdaq-100 tracking ETF (QQQ) to hedge or speculate on a continued decline. The weakness in mega-cap names like Apple and Amazon suggests the selling pressure is significant and not isolated to smaller companies.
This souring sentiment on AI and software stocks is a major reversal from the optimism that drove markets higher for the past few years. After the incredible AI-driven rally of 2023, the market is now scrutinizing the actual path to profitability and the threat of margin compression. We should look at shorting specific software ETFs or buying puts on companies like Cisco that are directly citing rising AI-related costs as a headwind.
Positioning For Continued Volatility
On the other side of the trade, we are seeing money flow into cyclical and value-oriented sectors. Opening long positions through call options on ETFs like the Industrial Select Sector SPDR Fund (XLI) or the Consumer Staples Select Sector SPDR Fund (XLP) could capture this rotation. This strategy allows us to benefit from the relative strength in areas of the market that are being favored in the current risk-off environment.
With the market becoming increasingly wobbly, we should anticipate a rise in volatility. The CBOE Volatility Index (VIX), often called the market’s “fear gauge,” recently traded near 14 in late 2025 but could easily spike toward the 20-25 range we saw during periods of uncertainty in 2023. Buying VIX call options is a direct way to profit from a potential increase in market fear and turmoil in the coming weeks.
The shocking plunge in existing home sales is a significant red flag for the economy, echoing the weakness we saw throughout 2023 when sales volume fell to its lowest level in nearly 30 years. This suggests we should consider bearish positions on homebuilder stocks, possibly by buying puts on the SPDR S&P Homebuilders ETF (XHB). The combination of high prices and deteriorating sales volume presents a major headwind for the housing sector.
Ahead of the crucial CPI report, the market is nervous about inflation and the Federal Reserve’s path. The repricing of rate cuts feels very similar to the “higher for longer” environment we navigated in late 2023, which weighed heavily on equities. We can use short-term options on the SPDR S&P 500 ETF (SPY) to hedge our portfolios against a hotter-than-expected inflation print that could spark the next leg down.
