Market Commentary

For the week ending 2/6/2026

 

February opened with significant volatility in the stock market as investors digested renewed AI worries, Big Tech earnings reports featuring spending concerns, general risk-off sentiment and weak labor market data.

Still, the Dow rallied, managed to hit 50,000 for the first time ever on Friday, and ended the week ahead 2.5%.

After reaching new record highs on Jan. 28, all major U.S. indices fell sharply this week. By Thursday, the Nasdaq Composite and S&P 500 had posted three consecutive losing sessions, with the S&P 500 and Nasdaq both slipping into negative territory for the year. Several factors contributed to last week’s pullback.

Software stocks took the biggest hit as Wall Street shifted away from growth and momentum areas towards defensive sectors. The sector took the brunt of the declines, with the subsector ETF down -32% since it’s high in October of last year. Investors seemed to have lost confidence in software companies as AI technology advanced, and some speculate that AI will provide a cheaper replacement to some software products in the near future. However, many respected and high-profile Wall Street leaders disputed the idea, arguing instead that AI will act as a tool that enhances existing software rather than making it obsolete.

Big Tech capital expenditures also weighed down sentiment. Alphabet (Google) shares initially dipped after forecasting up to $185 billion in spending for 2026, while Amazon shares dropped on news of a planned $200 billion in expenses to bolster AI infrastructure. Both companies reported strong growth for the fourth quarter, but the increased spending overshadowed that good news. Some analysts touted the capital expenditure plans as a positive as they were driven by a significant increase in demand.

Risk-off sentiment hit the precious metals and cryptocurrency markets very hard this week. Gold and silver plummeted on Friday, Jan. 30 and experienced substantially increased volatility throughout the previous week. Bitcoin declined along with equities and even plunged 11% just on Thursday to its lowest level since October 2024. Bitcoin has now lost half its value since its peak in October 2025.

In other disappointing news, January’s ADP private payroll report showed an increase of just 22,000 jobs, half the number that Wall Street was expecting. Challenger reported that U.S. employers announced 108,435 layoffs in January, the highest January total since 2009. December JOLTS job openings were sharply lower than expectations and the prior month. Weekly initial jobless claims rose this past week, however continuing jobless claims held steady near the lowest since October 2024.

Meanwhile, the Trump Administration announced it had reached a trade deal with India this week that will lower tariffs on India to 18%. Trump also said that India will stop purchasing oil from Russia and increase purchases of U.S. goods including petroleum, defense and aircraft.

Heading into this week, investors will be looking forward to the slightly delayed government report on January payrolls and employment, especially in light of the increased labor market concerns.

For the week, the S&P dipped -0.10% to 6,932, the Nasdaq fell -1.8% to 23,031 and the Dow rose 2.5% to 50,116.

Oil fell -2.6% to $63.55/bbl., gold rose 5% to $4,980/oz. and the yield on the 10-year Treasury dipped slightly to 4.21%.

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