Stocks Pare Gains After Fed Minutes as Bonds Fall: Markets Wrap
(Bloomberg) — Stocks trimmed gains as Federal Reserve officials signaled renewed concerns about inflation, tempering optimism about a slew of data showing the US economy is holding up. Bonds fell. Oil jumped.
The S&P 500 pared most of advance that earlier reached 1% as the Fed record showed “several” officials suggested the central bank may need to raise rates if inflation stays above their goal. After a tech rout fueled by concern over the AI outlook, investors are seeking signs of a bottom in the industry that’s powered the bull market. An ETF tracking software firms rose 1%.
Minutes of the Federal Open Market Committee’s Jan. 27-28 meeting released Wednesday also revealed that a “vast majority of participants judged that downside risks to employment had moderated in recent months while the risk of more persistent inflation remained.”
“From our perspective, the minutes support our view that rate cuts are off the table for the foreseeable future,” said Charlie Ripley at Allianz Investment Management.
In a sign of economic resilience, data showed US industrial production climbed in January by the most in nearly a year. Orders for business equipment rose in December by more than projected while housing starts hit a five-month high.
The S&P 500 rose to around 6,860. The yield on 10-year Treasuries climbed two basis points to 4.08%. A $16 billion sale of 20-year bonds drew lackluster demand. The dollar gained 0.5%. Bitcoin sank to around $66,000.
Oil rallied as traders weighed whether talks between the US and Iran will be enough to avert conflict, following a report that American military intervention could come sooner than expected. Gold rose to around $5,000.
The S&P 500 has been struggling to breach the 7,000 level since it first made its push toward that level back in October.
“US stock indices have regained their upside momentum,” said David Morrison at Trade Nation. “But will this prove strong enough to keep buyers engaged, and protracted enough to drive the S&P 500 above key resistance at 7,000?”
Bank of America Corp. clients dumped US equities last week, with single-stock outflows reaching $8.3 billion — the third highest since records began in 2008. There were outflows in nine of the 11 sectors, led by financials and consumer staples. Industrials, tech and consumer discretionary also saw large outflows.
Big tech carried the market over the past three years, and sustained broadening in the market’s sector participation is extremely important for the overall health of the bull market, noted Stanley at Granite Bay Wealth Management.
“We view the stock market as currently being in a ‘shaken, not stirred’ state,” said Craig Johnson at Piper Sandler. “Investors need to embrace the rotation as this year shapes up to be more of a ‘stock picker’s market’.”
Despite the recent breakdown in the “Magnificent Seven” megacaps and software makers, there hasn’t been much evidence of the broader market rolling over, according to Mark Newton at Fundstrat Global Advisors.
“Moreover, sentiment has turned more negative in the last week, given the volatility in equities,” he said. “However, I feel that the resilience of equity indices themselves is truly what to highlight as being a relative positive in 2026.”
Wall Street’s worries around AI shifted abruptly in recent weeks from skepticism that hyperscalers can monetize their heavy spending into practical use cases to concern that it is sophisticated enough to threaten business models beyond the traditional tech sphere. The sentiment whiplash has spurred sharp rotations and volatility within the stock market.
The software stock rout is likely “overdone” as that was a largely knee-jerk reaction, with investors trying to figure out the winners and losers from AI, according to Paul Stanley at Granite Bay Wealth Management.
“While AI is very promising, investors should not assume that all companies will win on the AI front,” he said.
Retail traders spent a record amount snapping up software shares on Citadel Securities’ platform, which began tracking the data in 2017. “The magnitude, persistence, and breadth of buying activity have materially exceeded prior peaks,” said Scott Rubner, the firm’s head of equity and equity derivatives strategy.
As market structure continues to be dominated by Commodity Trading Advisors, fund flows, and an increasing share of retail investors, Chris Senyek at Wolfe Research says volatility is likely to continue in the near-term, especially given the heightened sensitivity of stocks to AI disruption and other headline risk.
“One of the most frequently asked questions we’ve received recently from investors has been: What changes the market’s view on AI disruption?,” he said. “With hyperscaler capital expenditures growing at a breakneck pace, we see bottlenecks in data center buildout likely emerging over the coming quarters.”
Whether these bottlenecks are related to power generation, material costs, or regulatory hurdles, a cut/delay in spending would likely serve as a positive catalyst to areas of the market that have seen downward pressure due to AI concerns, namely software stocks, he said.
“Investors should review current exposures to US technology and communication services and consider hedging or diversifying exposures that are above benchmark levels,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.
In such a case, she says investors should consider diversifying toward preferred areas of the market where we see superior risk-reward, including industrials, banks, health care, utilities, and consumer discretionary.
Meantime, the highly-anticipated IPO boom may take a little longer to materialize as the market for new issuances limped into a seasonal quiet period.
Postponed listings from broker Clear Street Group Inc. and Blackstone Inc.-backed Liftoff Mobile Inc. and broader stock market volatility left a sour taste in growth investors’ mouths as the window for initial public offerings before annual audits came to an end last week. The jolt of delayed deals paired with choppy performances across the class of 2026 kept a lid on what’s been the busiest start to a year since the go-go days of 2021.
Also capturing Wall Street’s attention is the upcoming options expiry later this week.
The US listed-options market is set for $3 trillion of contracts by notional value to roll off on Friday, the largest ever for an expiration date in February, according to data from Citigroup Inc.
Corporate Highlights:
Mark Zuckerberg was sharply questioned on the witness stand about whether he and other leaders at Meta Platforms Inc. are aware of the volume of children under age 13 who use Instagram. Meta Platforms Inc. has agreed to deploy “millions” of Nvidia Corp. processors over the next few years, tightening an already close relationship between two of the biggest companies in the artificial intelligence industry. Berkshire Hathaway Inc. slashed its holding in Amazon.com Inc. by more than 75% in the fourth quarter, while also building a stake in the New York Times Co. — Warren Buffett’s last new bet as chief executive officer. Tesla Inc. will be allowed to continue selling electric vehicles in California uninterrupted after the company revised what the state had called misleading marketing of driver-assistance technology. Alphabet Inc.’s Google and Apple Inc. are adding music-focused generative artificial intelligence features to their core consumer apps, underscoring how advanced AI tools are moving into mainstream use. Alphabet Inc.’s Google introduced its latest entry-level Pixel smartphone, hoping that new AI software capabilities, minor hardware refinements and an unchanged $499 price can make up for an otherwise iterative update. Cybersecurity company Palo Alto Networks Inc. released a forecast for adjusted earnings that was weaker than anticipated. Powerlaw Corp., a fund that owns stakes in Anduril Industries Inc., SpaceX, OpenAI and Anthropic PBC, is filing to sell shares in New York, giving retail investors a shot at profiting from some of the biggest private companies in artificial intelligence, defense and space. The US Food and Drug Administration will review a Moderna Inc. flu shot made with mRNA technology, reversing a previous decision that shocked Wall Street and spurred a public spat between the company and its regulator. Kraft Heinz Co. announced Wednesday it’s replacing its North American president this month as its new chief executive officer embarks on a plan to bolster growth at the struggling food company, rather than continue with a planned split. Madison Square Garden Sports Corp.’s board of directors approved a plan to explore spinning off the NBA’s New York Knicks and NHL’s New York Rangers, a move that would make it easier to attract investors to the teams. Bank of America Corp. is broadening the scope of its rewards program to encourage customers to do more business with the company, part of an effort to reach lofty financial targets it promised investors last year. US banks including Huntington Bancshares Inc., First Horizon Corp. and M&T Bank Corp. are working to build a tokenized deposit network as financial firms fight to stay relevant amid the rise of digital assets. Uber Technologies Inc. is planning to spend more than $100 million to build fast-charging, autonomous-vehicle charging stations in the US, the latest move to establish itself as a critical player in the robotaxi industry. Wingstop Inc. reported better-than-expected results, easing fears of a marked slowdown at the chicken chain. A ruling requiring Kalshi to shut down its sports prediction contract offerings in Massachusetts won’t take effect until after an appeals court considers the company’s challenge to the ban. Billionaire tech investor Peter Thiel and his Founders Fund have fully exited ETHZilla Corp., according to a filing with the US Securities and Exchange Commission. Rare-earth refiner Phoenix Tailings Inc. has raised $30.2 million from investors, including metals trader Traxys North America LLC, to expand facilities that recover key minerals from mining waste. Liberty Global Ltd. agreed to buy out its partner Vodafone Group Plc in Dutch telecommunications company VodafoneZiggo for €1 billion ($1.2 billion) in cash and a stake in a new holding company. BAE Systems Plc predicted continued solid sales and earnings growth for the year after a record 2025, signaling the rapid expansion of defense budgets around the world shows little sign of abating. Glencore Plc made an additional distribution to shareholders, even as declining earnings from the commodity trader-cum-miner’s sprawling coal operations weighed on full-year profit. Rio Tinto Group took majority control of Canada’s Nemaska Lithium as part of a push to invest more in Quebec projects tied to the battery metal. French grocer Carrefour SA reported weaker-than-expected sales in its home market and announced plans to further shrink its international footprint. Polestar Automotive Holding UK Plc expects growth in deliveries to slow this year, tailoring sales to a volatile electric-vehicle market. What Bloomberg strategists say…
“The Magnificent Seven’s influence goes to show how hard it will be for the market to advance without megacap tech. While information technology’s weight in the S&P 500 has edged lower in recent months, it remains the largest sector by far, with a wide gap over the rest.”
— Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.2% as of 3:21 p.m. New York time The Nasdaq 100 rose 0.4% The Dow Jones Industrial Average was little changed The MSCI World Index rose 0.4% Philadelphia Stock Exchange Semiconductor Index rose 0.3% IShares Expanded Tech-Software Sector ETF rose 0.9% Bloomberg Magnificent 7 Total Return Index rose 0.3% The Russell 2000 Index was little changed Currencies
The Bloomberg Dollar Spot Index rose 0.5% The euro fell 0.6% to $1.1786 The British pound fell 0.5% to $1.3500 The Japanese yen fell 0.9% to 154.75 per dollar Cryptocurrencies
Bitcoin fell 2.2% to $66,152.9 Ether fell 3.2% to $1,935.84 Bonds
The yield on 10-year Treasuries advanced two basis points to 4.08% Germany’s 10-year yield was little changed at 2.74% Britain’s 10-year yield was little changed at 4.37% The yield on 2-year Treasuries advanced two basis points to 3.46% The yield on 30-year Treasuries advanced two basis points to 4.71% Commodities
West Texas Intermediate crude rose 4.6% to $65.19 a barrel Spot gold rose 2.1% to $4,978.37 an ounce ©2026 Bloomberg L.P.
