Stocks Fall From Near-Record Levels as Oil Jumps: Markets Wrap
(Bloomberg) — Wall Street traders drove the S&P 500 down from near-record levels as chipmakers erased a rally amid a rotation into more economically sensitive industries. Gold and silver rebounded after a historic selloff while oil jumped amid a flare-up in geopolitical risks.
Equities extended losses on news the US Navy shot down an Iranian drone headed toward an aircraft carrier in the Arabian Sea. A drawdown in companies in the data-services space weighed on trading, with the release of an automation tool for the legal profession by artificial-intelligence firm Anthropic. Gartner Inc. lost around a quarter of its value, while Factset Research Systems Inc., S&P Global Inc. and Accenture Plc were all hit.
The S&P 500 lost 1.1%. The Nasdaq 100 lost 1.9%. A gauge of chipmakers sank 3%. The Russell 2000 slid 0.5%. Walmart Inc. topped $1 trillion. FedEx Corp. – an economic barometer – extended a record run. Palantir Technologies Inc. jumped 6.5% on a solid outlook. Advanced Micro Devices Inc. will report results after the close.
Bets on AI companies have dominated the US equity market for three years, but a growing number of investors are now wagering that run, led by the “Magnificent Seven” megacaps, is giving way to broader market participation. In fact, a violent rotation has taken place in 2026, with value shares far outpacing growth.
“Our sense is that markets are churning underneath the surface as worries over AI capital spending battle with ‘hopes and dreams’ of broadening out as a result of an accelerating US economy,” said Chris Senyek at Wolfe Research.
The dollar fell 0.3% after notching its biggest back-to-back advance since April. Treasury yields barely budged, with investors parsing the latest remarks from central bank speakers.
Federal Reserve Bank of Richmond President Tom Barkin said policy easing has bolstered the jobs market as officials now look to bring inflation back to the target. Fed Governor Stephen Miran said the absence of strong price pressures means rates need to be lowered again this year.
Gold jumped 6.5%. Oil climbed 2%. Bitcoin fell below $76,000.
“Despite elevated volatility across the macro landscape, the underlying structure of this market is clear: We are in a ‘rotational’ bull market,” said Craig Johnson at Piper Sandler. “Capital is rotating into cyclicals and value stocks.”
Optimism that the American economy is set to take off has fueled the rotation, with companies whose fortunes are closely tied to the business cycle attracting investor cash. At the same time, AI investing has become less monolithic in the tech sector, with investors starting to choose winners and losers.
“We are shifting our tactical allocation from neutral to favoring value over growth,” said Ed Clissold and Thanh Nguyen at Ned Davis Research. “Several of the factors we said we were watching when we moved to neutral have moved in value’s direction.”
The strategists noted that earnings growth from value stocks has exceeded expectations. While results from tech megacaps were in line or better than expected, market reaction to their spending plans varied wildly.
“We view the challenge for some ‘Magnificent Seven’ stocks as more of a valuation issue than an earnings growth issue,” they said. “If economic growth moderates in the second half of 2026 as our macro team expects, investors may return to paying a premium for companies that can deliver earnings-per-share growth.”
Given the massive capex spend by hyperscalers, the premium may be less than in 2021-2025, but we do not rule out a return to the growth premium trade later this year, which would necessitate a rotation back into growth stocks, they concluded.
“The technology/software relative weakness is a continuation of the theme of the last several months, with earnings season serving as a measuring stick on investor expectations,” said Mark Hackett at Nationwide. “The strong performance and high relative valuations create a higher bar for the large-cap technology space versus the rest of the market.”
After Microsoft Corp.’s cloud revenue growth fell short of expectations, investors are now looking to Amazon.com Inc.’s and Alphabet Inc.’s results this week for insights into productivity gains, revenue generation, and margin growth, noted Ulrike Hoffmann-Burchardi at UBS Global Wealth Management
“With continued demand, durable spending, and encouraging monetization trends, we believe AI will remain a key engine of overall equity performance,” she said. “We also expect beneficiaries to continue to broaden to the application layer of the AI value chain as well as users of the technology in other sectors.”
Her firm expects the S&P 500 to move higher, and maintains its December price target of 7,700.
“We recommend investors position for a broadening rally, favoring financials, health care, utilities, and consumer, discretionary beyond the tech sector,” Hoffmann-Burchardi said.
Last week’s tech selloff saw lofty expectations for cloud revenues – now a proxy for how well AI is being monetized – disappointed, noted Lauren Goodwin at New York Life Investments.
“We are in the earliest days of AI, and monetization of these capabilities is a moving target,” she said. “Instead of near-term AI revenues, we are looking for ongoing capex commitments from AI hyperscalers to assess the resilience of the AI boom, and we continue to see physical investment plans expand.”
Among the most-recent investments in the space, Elon Musk is combining SpaceX and xAI in a deal that values the enlarged entity at $1.25 trillion, as the world’s richest man looks to fuel his increasingly costly ambitions in AI and space exploration.
And this past Sunday, Oracle Corp. said it plans to raise $45 billion to $50 billion this year through a combination of debt and equity sales to build additional cloud infrastructure capacity, reflecting the scale of financing needed to feed AI’s growth.
The announcement — and a subsequent bond sale Monday — coincided with persistent fears about whether massive AI-linked investments by tech companies will pay off.
“The biggest concern about the AI revolution is that tech companies are spending hun-dreds of billions on AI infra-structure, without any guarantee that it will produce a positive ROI (Return on Investment),” said Tom Essaye at The Sevens Report.
“I’ve often compared the current AI revolution to the rollout of electricity in the country, where the industrialists of the 20th century funded the wiring of the country. Well, what if people preferred candles and didn’t buy electricity? They would have lost the equivalent of billions,” he said.
Read: Blackstone’s Gray Says 2026 Shaping Up to Be ‘Year of the IPO’
Meantime, retail traders’ appetite for US equities faces a tough test as the record buying wave that powered last month’s rally shows signs of fatigue.
January net inflows ran more than 50% above the same period last year, according to Citadel Securities data. That pace of buying from the retail crowd is difficult to maintain — particularly in February, a seasonally slower month for equities — according to Scott Rubner, head of equity and equity derivatives strategy at the firm.
Since 2017, retail activity has consistently moderated from January into February, showing a consistent decline in net notional cash following an early-year surge, Citadel Securities data show.
“We expect global equities to rise around 10% by the end of this year, and investors who have concentrated positions in the US should benefit from diversifying into other markets,” said Mark Haefele at UBS Global Wealth Management. “Ultimately, we believe one of the most effective ways to manage macroeconomic uncertainty and market volatility is to ensure portfolio diversification.”
Corporate Highlights:
Palantir Technologies Inc. rose following a revenue forecast for fiscal 2026 that significantly exceeded Wall Street expectations, a boost for the data analytics company after its shares have gotten off to a lackluster start so far this year. Walt Disney Co. said Josh D’Amaro will succeed Bob Iger as chief executive officer of the entertainment giant, passing the reins at a key moment in the company’s history and after struggles to find a new leader in the past. Paramount Skydance Corp. Chief Executive Officer David Ellison turned down an invitation to testify before the Senate at an antitrust hearing about the proposed tie-up between Netflix Inc. and Warner Bros. Discovery Inc. PayPal Holdings Inc. said HP Inc. Chief Executive Officer Enrique Lores will take the top job from Alex Chriss, whose turnaround plan failed to meet targets and streamline the sprawling payments business. PepsiCo Inc. is cutting prices by as much as 15% for key brands, including Lay’s and Doritos, in a bid to lift sales by offering more affordable products. Archer-Daniels-Midland Co. shares tumbled as weak crush margins and a delay on US biofuel policy continue to weigh on the company’s results. Pfizer Inc. revealed data from one of its new obesity treatments early Tuesday with little detail, leaving investors wondering if the up to $10 billion it spent purchasing the company that created the medicine will pay off. Merck & Co. forecast 2026 sales and profit that missed Wall Street’s expectations as continued challenges with its HPV vaccine Gardasil, which may remain off the market in China this year, overshadowed growth from newer drugs. The US Food and Drug Administration turned down a self-administered version of AstraZeneca Plc’s lupus medicine, but the UK drugmaker said it’s still working with regulators to advance the request. Uber Technologies Inc. is rolling out its ride hailing service in the Chinese gambling hub of Macau, expanding into a new Asian market for the first time in years. Billionaire Michael Novogratz said he remains optimistic even after Galaxy Digital Inc. posted a wider-than-expected loss of almost $500 million during the crypto market’s fourth-quarter crash. The crypto exchange Kraken, which is planning to go public, saw revenue and earnings fall sequentially in the fourth quarter while digital asset prices tumbled and investor demand plummeted. Ivanhoe Mines Ltd. is looking to supply the US with minerals mined in the Democratic Republic of Congo as the Trump administration moves to build strategic stockpiles and loosen China’s grip on global supply chains. Novo Nordisk A/S said its sales will drop this year as its blockbusters Ozempic and Wegovy face ever-tougher competition and the company gets hit by the US government’s push to cut drug prices. Mercuria Energy Trading SA has signed a 20-year agreement to buy liquefied natural gas from the US through Commonwealth LNG’s planned facility in Louisiana, as the trading house looks to bolster its gas positions globally. Siemens Energy AG will invest $1 billion (€847 million) in manufacturing capacity in the US over the next two years as power demand surges. Nintendo Co.’s profit rose a smaller-than-expected 23% after the US levied tariffs on the Switch 2 console, revealing a big hit to margins while concerns grow about the impact of soaring memory chip prices in 2026. Some of the main moves in markets:
Stocks
The S&P 500 fell 1.1% as of 12:37 p.m. New York time The Nasdaq 100 fell 1.9% The Dow Jones Industrial Average fell 0.6% The MSCI World Index fell 0.5% Bloomberg Magnificent 7 Total Return Index fell 1.6% The Russell 2000 Index fell 0.5% Philadelphia Stock Exchange Semiconductor Index fell 3% S&P 500 Equal Weighted Index fell 0.4% FedEx rose 5.5% Palantir rose 6.7% Currencies
The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.2% to $1.1819 The British pound rose 0.3% to $1.3701 The Japanese yen was little changed at 155.64 per dollar Cryptocurrencies
Bitcoin fell 3.7% to $75,597.82 Ether fell 5% to $2,224.32 Bonds
The yield on 10-year Treasuries advanced one basis point to 4.29% Germany’s 10-year yield advanced two basis points to 2.89% Britain’s 10-year yield advanced one basis point to 4.52% The yield on 2-year Treasuries was little changed at 3.58% The yield on 30-year Treasuries was little changed at 4.92% Commodities
West Texas Intermediate crude rose 1.8% to $63.25 a barrel Spot gold rose 6.3% to $4,954.41 an ounce ©2026 Bloomberg L.P.
