Fixed Income & Equities Markets Week in Review

The US market ushered in February with increased market volatility. Following a positive open for US stocks on Groundhog Day, investors shifted risk-off for much of the week. Through Thursday’s market close, the S&P 500 traded lower by more than 2% on the week; US stocks were attempting to reclaim some of this week’s losses on Friday.

For most of the week, investors continued to rotate out of technology stocks with the software space seeing outsized selling pressure. Artificial intelligence (AI)-driven disruption concerns—most recently sparked by Anthropic’s Claude plug-in release—further pressured sentiment in the software space. The iShares Expanded Tech-Software Sector ETF (IGV) has moved lower by 24.6% year-to-date through Thursday’s market close. Meanwhile, as investors have rotated out of technology names, market breadth has improved, with the Invesco S&P 500 Equal Weight ETF outperforming the market capitalization weighted S&P 500 by more than 4% this year.

It was another heavy week of S&P 500 earnings, with the blended earnings growth rate rising to 13.0%; growth expectations at quarter end were 8.3%. Investors scrutinized Alphabet (GOOGL) and Amazon’s (AMZN) 2026 capex guides of $175-$185 billion and $200 billion respectively; both were well above consensus estimates. These outsized AI capex plans renewed concerns about whether such investment outlays will ultimately pay off. Still, both GOOGL and AMZN showed strong AI-driven revenue growth for Google Cloud and Amazon Web Services respectively in fourth quarter results. Next week, 78 S&P 500 companies are on the calendar to report quarterly results.

The US market had mixed reactions to this week’s economic data. The January ISM Manufacturing print returned to expansionary territory at 52.6, well ahead of expectations, providing additional support for US market rotation. In contrast, labor data was not quite as rosy. ADP private payrolls rose just 22,000 in January, below consensus and below December’s figure. The Challenger Report showed January job cuts exceeded 108,000, the highest January total since 2009. UPS and AMZN are a couple of notable names having made layoff announcements. Investors now await the January Nonfarm Payrolls report on the 11th.

Earnings growth, expectations for further Federal Reserve interest rate cuts, and fiscal policy remain potential catalysts for US stocks. Despite recent market volatility, the S&P 500 is down only 0.60% year-to-date through Thursday. Given market activity over the past couple of weeks, that number may be a surprise to some.