US STOCKS-Wall St selloff deepens led by software, cloud firms

By Pranav Kashyap and Twesha Dikshit

Feb 3 (Reuters) - Wall Street's main indexes dropped on Tuesday as a broad selloff in software and cloud stocks deepened to include other technology names, blunting upbeat results from Palantir and keeping investors on edge ahead of earnings from Alphabet and Amazon later this week.

Microsoft MSFT.O fell 2.8%, while Intuit INTU.O and Atlassian TEAM.O slid around 11% each. Adobe ADBE.O and Datadog DDOG.O dropped over 7% each and Oracle ORCL.O slipped 4.3%.

CrowdStrike CRWD.O sank 4.5% and Snowflake SNOW.N dropped 10.6%, while Salesforce CRM.O lost 8% and Accenture ACN.N was down 10%.

Palantir PLTR.O bucked the trend, rising 7% on strong results that reinforced investor enthusiasm for demand tied to AI.

The S&P 500 software and services index .SPLRCIS dropped 4%, on pace to log its fifth consecutive day of losses.

The retreat in tech shares followed lingering concerns over how quickly newer, more capable artificial intelligence models could disrupt established businesses - reviving questions over whether today's perceived AI winners can protect pricing power and long-term growth.

"We've got an expensive market and expectations are really high. Many areas, especially around AI, are priced for perfection. That's just got us in a skittish environment," said John Campbell, senior portfolio manager, Allspring Global Investments.

Healthcare stocks came under pressure after Wegovy maker Novo Nordisk warned that it expected a steep decline in annual sales. The company's U.S.-listed shares NVO.N dropped 12%.

Rival Eli Lilly LLY.N fell 4.6%, while other obesity drugmakers Viking Therapeutics VKTX.O and Structure Therapeutics GPCR.O were down 3.7% and 6.4%, respectively.

Investors were still digesting a sharp selloff in gold and silver following the nomination of former Federal Reserve Governor Kevin Warsh, a development traders viewed as hawkish.

Away from technology, Walmart WMT.O became the first retailer ever to hit $1 trillion in market valuation, with its shares rising 2.4%.

Mega-cap movers, Alphabet GOOGL.O dipped 1%, while Amazon AMZN.O dropped 2.7%.

Both the companies - members of the "Magnificent Seven" - are due to report later this week. Their results will be scrutinized on whether companies can show tangible returns on surging capital expenditure.

Advanced Micro Devices AMD.O and server maker Super Micro Computer SMCI.O, both due to report after the close, fell over 2.5% each.

Meanwhile, Walt Disney DIS.N named theme parks head Josh D'Amaro as CEO, placing a longtime insider at the helm and ending succession uncertainty. Its shares were marginally lower.

PayPal PYPL.O forecast 2026 profit below estimates, sending its shares plunging 20%.

At 1:16 p.m. ET, the Dow Jones Industrial Average .DJI fell 0.81%, to 49,006.27, the S&P 500 .SPX lost 1.22%, to 6,891.45 and the Nasdaq Composite .IXIC lost 1.93%, to 23,135.95.

EARNINGS DELUGE

With one quarter of the S&P 500 set to report quarterly results this week, analysts expect companies to have grown their earnings nearly 11% in the December quarter, up from an estimate of about 9% at the start of January, according to LSEG data.

Pfizer PFE.N shares fell 3.4% despite posting fourth-quarter profit above estimates, while Merck MRK.N rose 2.5% after quarterly results.

PepsiCo PEP.O shares gained 4.3%, with the brand announcing a price cut on core brands such as Lay's and Doritos.

Meanwhile, legislation to end a U.S. government shutdown narrowly cleared a procedural hurdle in the House of Representatives, setting up a vote on final passage later in the day.

The partial shutdown has postponed releases of key jobs data on Friday along with the JOLTS report, originally expected on Tuesday.