Weekend Market Report 2/1/26

Market Overview - U.S. stocks experienced a decline at the end of January, influenced by weakness in the tech sector and a significant selloff in commodities, despite solid earnings reports [3][21] - The S&P 500, Dow, and Nasdaq all closed lower on the last trading day of January, with the S&P 500 down 0.43% to 6,939.03 and the Dow down 0.36% to 48,892.47 [5][21] - The Russell 2000 index outperformed, surging 5% for the month, indicating a potential rotation towards small-cap stocks [4][18] Earnings Season Insights - Earnings season has shown solid but not exceptional results, with 74.4% of 133 S&P 500 companies beating expectations, slightly below the four-quarter average of 78% [8] - Q4 earnings are projected to grow by 10.2% year-over-year, with full-year 2026 earnings expected to increase by 15% [8] Tech Sector Performance - The tech sector faced significant pressure, particularly after Microsoft's disappointing cloud growth guidance, which led to a sector-wide selloff [7][21] - The "Magnificent Seven" tech stocks are under scrutiny, with even earnings beats being sold off if guidance is disappointing [7][17] Commodity Market Dynamics - The commodity markets experienced a dramatic reversal, with gold plunging 11.4% to $4,745 and silver crashing 31.4%, marking its worst single-day drop in modern history [9] - The selloff was triggered by profit-taking following a surge in prices earlier in the week, as investors reacted to the nomination of Kevin Warsh as Fed Chair [9][19] Federal Reserve and Economic Data - Kevin Warsh's nomination as Fed Chair has created uncertainty regarding the Fed's future path, as he is perceived as hawkish on inflation but dovish on rates [6][18] - Recent economic data indicated a rise in the Producer Price Index (PPI) for December by 0.5% month-over-month, suggesting the Fed may maintain higher rates for an extended period [13] Upcoming Events and Expectations - The upcoming week features significant earnings reports from major companies, including Palantir, Disney, Alphabet, and Amazon, which will be closely watched for insights into cloud growth and AI capital expenditures [15][17] - The January jobs report is anticipated to be pivotal, with expectations of a +70K increase in nonfarm payrolls, which could influence market expectations for Fed policy in 2026 [16][18]