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Several disappointing updates on the labor market and lingering worries over the return on investment for big artificial intelligence (AI) spenders weighed on stocks Thursday. An extended sell-off in bitcoin only underscored the risk-off session, with the digital currency falling to its lowest point in over a year.
The economic calendar was jam-packed with jobs data today. First up was a report from executive outplacement firm Challenger, Gray & Christmas that showed job cuts more than doubled year over year in January and tripled from December 2025.
The 108,435 job cuts last month marked the highest for January since 2009. More than 40% of the cuts came from two companies – United Parcel Service (UPS) and Amazon.com (AMZN).
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“Generally, we see a high number of job cuts in the first quarter, but this is a high total for January,” says Andy Challenger, workplace expert and chief revenue officer for Challenger, Gray & Christmas. “It means most of these plans were set at the end of 2025, signaling employers are less-than-optimistic about the outlook for 2026.”
Meanwhile, data from the Labor Department showed that initial jobless claims rose by 22,000 last week to 231,000 – a two-month high.
Wall Street also got to see the Job Openings and Labor Turnover Survey (JOLTS) for December, which was initially supposed to be released Tuesday morning but was delayed due to the short-lived government shutdown.
The data showed job openings fell to 6.5 million in December from November’s 6.9 million. Hires and separations ticked higher, to roughly 5.3 million each.
“The December JOLTS report underscored the labor market remains in a precarious position,” writes Wells Fargo economists Sarah House, Michael Pugliese and Nicole Cervi.
Job openings are now down 10% year over year, they add, suggesting “a turnaround in hiring conditions is not yet upon us.”
The economists note that while the more forward-looking job cuts data from Challenger, Gray & Christmas “have not risen to a degree that signal a mass loss in employment, the pickup is a reminder that firms are not opposed to cutting headcount when other options have been exhausted.”
Alphabet ramps up AI spending
It wasn’t all about the labor market today. Indeed, the earnings calendar gave market participants plenty to consider.
In its highly anticipated print, Alphabet (GOOGL) reported fourth-quarter earnings of $2.82 per share (+31% YoY), on revenue of $113.8 billion (+18% YoY), beating analysts’ expectations.
The company also saw Google Services revenue jump 14%, YouTube ad revenue rise nearly 9% and Google Cloud revenue, which includes enterprise AI Infrastructure and enterprise AI solutions, soar 48%.
However, the Magnificent 7 stock slipped 0.5% after the company said it expects capital expenditures to range between $175 billion and $185 billion in 2026, roughly double what the company spent in 2025, as it ramps up spending on AI initiatives.
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The massive increase in capex is likely to pressure margins, warns Wedbush analyst Scott Devitt. However, he believes the investment “will support ongoing adoption and growth across AI infrastructure, genAI solutions, and core Google Cloud Platform (GCP) products.”
Microsoft drops on rare downgrade
Microsoft (MSFT) was another Mag 7 stock that closed lower Thursday, shedding 5.0% after Stifel analyst Brad Reback downgraded it to Hold from Buy and slashed his price target to $392 from $540.
Reback believes the Street’s top and bottom-line expectations for fiscal year and calendar year 2027 are too high. “Given the well-documented Azure supply issues, coupled with Google’s strong GCP/Gemini results and growing Anthropic momentum, we believe near-term Azure acceleration is unlikely,” he adds.
Even with the rare downgrade, MSFT remains one of the top-rated Dow Jones stocks. Of the 56 analysts following it who are tracked by S&P Global Market Intelligence, 54 say it’s a Buy or Strong Buy and two have it at Hold. This works out to a consensus Strong Buy rating.
McKesson soars on earnings beat
Not all of the day’s action was to the downside. McKesson (MCK) jumped 16.5% – making it the best-performing S&P 500 stock today – after the medical supplies distributor reported strong fiscal third-quarter results and gave upbeat full-year guidance.
Utilization trends and specialty distribution are positive contributors heading into the company’s final quarter of its fiscal year, says Morgan Stanley analyst Erin Wright, who has an Overweight (Buy) rating on the blue chip stock. “Operational efficiency gains from technology and automation are also positioning MCK well. All in, it seems the momentum is building.”
As for the main indexes, the blue chip Dow Jones Industrial Average was down 1.2% at 48,908, the broader S&P 500 was off 1.2% at 6,798, and the tech-heavy Nasdaq Composite was 1.6% lower at 22,540.
Bitcoin, meanwhile, had lost 12.6% at last check to trade near $64,100 – a level not seen since October 2024. The cryptocurrency has shed 26% so far this year.