Finance
Dip-buyers go missing as software selloff slams stocks
Published by Global Banking and Finance Review
Posted on February 4, 2026
3 min readLast updated: February 4, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on February 4, 2026
3 min readLast updated: February 4, 2026
The software sector faces a major selloff with dip-buyers missing. Defensive options trading and increased short selling highlight market sentiment.
By Saqib Iqbal Ahmed
NEW YORK, Feb 4 (Reuters) - The software sector's deepening selloff on Wednesday failed to lure bargain hunters, with the dip-buying reflex that has rescued countless tech routs conspicuously absent.
After a broad selloff on Tuesday that saw the S&P 500 software and services index fall nearly 4%, the sector slipped another 1% on Wednesday, down for a sixth-straight session, extending a decline that has shifted from AI optimism to disruption fears.
Unlike other recent market slides, where investors have been quick to snap up battered shares, the worst selloff in the sector since 2022, when rising rates hammered software stocks, invited few buyers.
"In general, our customers have not been as eager to buy dips in software as they are for precious metals and semis," Steve Sosnick, chief strategist at Interactive Brokers, said.
"While it’s possible that our clients are buying dips in software, it is by no means in the forefront of their activity," he said.
Options traders also showed a lack of appetite for scooping up the battered software names.
"Software continues to trade heavy, and the options flow remains overwhelmingly defensive," Chris Murphy, co-head of derivative strategy at Susquehanna Financial, noting defensive activity in the options on iShares Expanded Tech-Software Sector ETF and ARK Innovation ETF. IGV shares were down 3%, while the ARKK ETF fell nearly 7%.
"In IGV and ARKK, we’ve seen traders pressing downside exposure rather than stepping in with dip-buying interest," Murphy said.
In general, the tone in software remains defensive, Murphy said.
Interactive Brokers' Sosnick said Microsoft, while not purely a software company, was one notable exception to the generally bearish tone in the sector, with the company drawing buyers. Microsoft shares, down about 15% since the company reported results on January 28, were up about 1% on Wednesday.
Still, short sellers, who aim to sell borrowed shares to buy them back at a profit, were emboldened by the sharp declines in the sector.
These traders were selling shares even as stocks came under pressure, Leon Gross, research analyst at S3 Partners, said.
"Historically, Microsoft behaves like a reversal stock, with shorts covering on the way down. Now it is trading like a momentum‑driven, distressed name, with shorts increasing into weakness," Gross said, noting that Microsoft short interest had increased by about 20% over the past week.
(Reporting by Saqib Iqbal Ahmed, Editing by Nick Zieminski)
Dip-buying refers to the strategy of purchasing stocks or assets after their prices have dropped, with the expectation that they will recover and increase in value.
Investor sentiment is the overall attitude of investors toward a particular security or financial market, often influenced by market trends, news, and economic indicators.
Options traders are investors who buy and sell options contracts, which give them the right, but not the obligation, to buy or sell an underlying asset at a predetermined price.
Short selling is an investment strategy where an investor borrows shares and sells them, hoping to buy them back at a lower price to return to the lender, profiting from the price difference.
The S&P 500 is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States, serving as a benchmark for the overall market.
Explore more articles in the Finance category
