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Why is the stock market down? Here is what experts have to say

By a Yahoo Finance Senior Financial Correspondent Feb. 5, 2026, 2:12 p.m. ET

A chilling effect swept through Wall Street on Monday, extending a market downturn as investors grappled with a dual-fronted storm of uncertainty. The once-unshakeable optimism surrounding cryptocurrency and artificial intelligence has given way to significant concerns over regulatory crackdowns and staggering corporate costs, pulling major indexes deeper into the red and leaving market-watchers questioning the sustainability of last year's tech-fueled rally.

The market slide reflects a broader reassessment of risk in two of the most pivotal sectors of the modern economy. After a year of explosive growth, a harsh reality check is setting in.

The Market by the Numbers

Major U.S. stock indexes continued their February plunge in afternoon trading, signaling persistent investor anxiety.

According to data from CNBC and MarketWatch, the tech-heavy Nasdaq Composite bore the brunt of the sell-off, while the Dow and S&P 500 posted significant losses of their own.

• Nasdaq Composite: Down approximately 0.8%, as investor confidence in high-growth technology stocks wanes.
• S&P 500: Fell between 0.6% and 0.7%, indicating a broad-based market decline affecting a wide swath of the U.S. economy.
• Dow Jones Industrial Average: Dropped between 0.6% and 0.7%, showing that even blue-chip industrial giants are not immune to the current wave of pessimism.

This downturn is not a single-day event but an acceleration of a trend that has defined the start of 2026, erasing some of the substantial gains seen throughout 2025.

Factor 1: The Crypto Winter Deepens

The digital asset space, a major source of market euphoria in 2025, is now a primary driver of investor fear. A sharp price correction in bitcoin is being amplified by new regulatory threats, creating a negative feedback loop.

Bitcoin's Precipitous Fall

The world's leading cryptocurrency has experienced a dramatic reversal of fortune.

After soaring to a peak of over $126,000 in October 2025, bitcoin has shed nearly half its value. The price action on Monday sent it tumbling below a key psychological and technical level.

• Key Price Level Breached: Shares of bitcoin fell below $67,000, a benchmark not seen since President Donald Trump's second-term election victory in November 2024. This move effectively wiped out all the gains accumulated during its meteoric 2025 run.

Regulatory Clouds Gather

Adding to the price pressure is a growing sense that regulators are closing in on the industry. A new lawsuit filed against a major U.S. exchange has sent a ripple of fear through the market.

• Coinbase in the Crosshairs: The state of Nevada filed a lawsuit against crypto exchange Coinbase on Feb. 4. The suit alleges that some of the company's event contracts, which allow users to bet on the outcomes of real-world events, violate state securities and gambling laws. While a state-level action, experts see it as a potential harbinger of a broader and more aggressive regulatory posture from both state and federal authorities.

Factor 2: AI's Staggering Price Tag

The second major headwind comes from the artificial intelligence sector. While AI remains the most significant technological shift in a generation, the astronomical cost of building out the required infrastructure is beginning to spook investors who are now demanding short-term profitability over long-term promises.

This marks a crucial shift in sentiment, as the very companies leading the AI race are now being punished for the scale of their ambition.

The "Magnificent 7" Feel the Strain

Two of the market's most influential companies, Alphabet and Microsoft, recently signaled a massive ramp-up in AI-related capital expenditures, triggering a sharp sell-off in their shares.

• Alphabet's Spending Shock: In its latest earnings report, Google's parent company projected a significant increase in spending dedicated to AI development and infrastructure. This forecast overshadowed otherwise solid results, as investors calculated the impact of these colossal costs on future profit margins.

• Microsoft's Historic Plunge: Microsoft, another member of the "Magnificent 7," delivered a similar outlook on Jan. 29. The company's warning of accelerating AI infrastructure costs sent its stock down 12% in the following session, putting it on track for its worst single-day performance since the pandemic-induced market crash of March 2020. This stark reaction demonstrates the market's newfound sensitivity to the costs of the AI arms race.

What This Means for Investors

The market's current trajectory suggests a fundamental shift from the "growth-at-all-costs" mindset of 2025 to a more cautious focus on profitability and stability.

The twin pressures from the crypto and AI sectors highlight a period of reality-setting. The speculative frenzy that drove asset prices to historic highs is now being met with difficult questions about regulatory legitimacy and the immediate return on investment for capital-intensive technologies.

Looking Ahead: What to Watch

With uncertainty as the market's dominant theme, experts are advising investors to monitor several key developments in the coming weeks and months.

• Crypto-Regulatory Developments: The progress of Nevada's lawsuit against Coinbase will be closely watched as a bellwether for future regulatory actions. Any hint of federal involvement from agencies like the SEC could further dampen sentiment in the digital asset space.

• Tech Earnings and Margins: The next round of quarterly earnings from major technology firms will be under intense scrutiny. Investors will be looking for any evidence that the massive AI investments are beginning to translate into revenue, or if they will continue to be a drag on profitability.

• Shifting Investor Sentiment: The key question is whether this is a short-term correction or the beginning of a prolonged bear market for the tech and crypto sectors. Market sentiment will be a crucial indicator, as continued pessimism could fuel further selling.