WEEKLY MARKET SUMMARY
Global Equities: US stocks saw an uptick in volatility, particularly in technology stocks, selling off sharply on Thursday but rebounding on Friday. The Dow Jones Industrial Average led the way with a 2.5% weekly gain, reaching a new all-time high and breaking the 50,000 level. The S&P 500 ended the week relatively unchanged at -0.1% and the Nasdaq Composite finished down -1.8%, rallying back on Friday and regaining some of Thursday’s losses. US small cap stocks also recovered sharply on Friday to end the week up 2.1%. Shares of foreign developed market stocks were up 1.9% in the weekly session, while emerging markets gained 1.6%.
Fixed Income: The 10-Year Treasury Yield tested 4.3% but fell sharply late in the week to end at 4.22%. Weaker-than-expected jobs data pulled Fed rate cut expectations forward slightly, contributing to the decline in yields along with safe-haven demand as growth stocks sold off sharply later in the week.
Commodities: US West Texas Intermediate Crude prices ended the week relatively unchanged at $64 a barrel. Precious metals continued to be extremely volatile, with gold selling off Thursday but rebounding Friday to end the week slightly higher at $4,988/oz. Silver prices slipped further after the prior week’s historic move lower, ending at $77/oz.
WEEKLY ECONOMIC SUMMARY
Jobs Data: The Fed expressed confidence in the US labor market during its most recent meeting, but new data showed some potential signs for concern. Weekly jobless claims ticked up to 231,000, exceeding consensus estimates of 212,000. A separate report on Jobs Openings and Labor Turnover (JOLTS) showed fewer-than-anticipated job openings in December. The JOLTS report showed 6.5 million openings compared to the consensus forecast of 7.25 million. Job cut data from Challenger, Gray and Christmas showed layoffs rose from 35,553 to 108,135 in January. Further labor market weakness was evident in private payroll data from ADP, which showed just 22,000 jobs added in January, missing estimates of 45,000. Odds of a Fed rate cut in March rose slightly on the data, but the market is still betting that the Fed will remain on hold until the second half of 2026.
Manufacturing Data Impresses: The Institute for Supply Management (ISM) manufacturing report showed the sector expanded after 26 straight months of contraction, a welcome sign for the Trump administration which has been aggressively working to rebuild domestic manufacturing with little progress to date. The Manufacturing Purchasing Managers’ Index (PMI) registered 52.6 in January, up 4.7% from December. The US manufacturing sector represents approximately 10% of total GDP.
Earnings Update: Google parent company Alphabet (GOOGL/GOOG) and Amazon (AMZN) were the biggest names reporting this week. Alphabet delivered a strong quarter, beating across all major business segments with a particularly noteworthy 48% surge in cloud revenue. Investors were spooked by aggressive capital expenditure plans in AI, which is slated to nearly double to $175-185 billion. Amazon posted mixed results with a slight miss on EPS but also reported strong growth from its AWS cloud business. Shares were harshly punished, however, as investors disliked the planned $200 billion in AI spending. Sentiment has clearly shifted regarding hyperscaler spending, with investors growing skeptical that the mega cap tech names can achieve the return on investment needed to justify the aggressive spending.
CHART OF THE WEEK
The Chart of the Week shows the increase in capex spending on AI from major tech companies compared to their already-sizeable 2025 investments. While investors are demanding measurable results and growing uncomfortable with AI spending, the tech giants are doubling down on their investments, to the benefit of Nvidia (NVDA) and other companies that manufacture chips and memory components. AI capex could make up 50% or more of 2026 GDP growth, at an estimated 1.4-1.5% contribution, with some more aggressive estimates approaching 2%.
Commentary from VestGen Investment Management.