Tech Stocks Fuel Wall Street Rebound Before Data: Markets Wrap

(Bloomberg) — Another rally in tech companies after an artificial intelligence-driven rout drove stocks higher before economic data that will help shape the Federal Reserve outlook. Gold topped $5,000. The dollar fell.

Following a surge that added $1 trillion to the S&P 500’s value at the end of last week, the index kept rising. While most of its shares fell, technology firms that were at the center of the recent selloff extended their rebound. A gauge of chipmakers climbed 1.7% while an exchange-traded fund focused on software names extended a back-to-back advance to 6.5%.

“When markets sell off like certain areas in tech have, there’s often knee-jerk rallies,” said Sameer Samana at Wells Fargo Investment Institute. “Time will tell if we need a retest or if enough value was created.”

Investors are gearing up for a busy week of economic readings that include arguably the two most consequential data snapshots — employment and inflation.

The jobs report, scheduled for Wednesday, is expected to show payrolls rose 69,000 in January. The unemployment rate is seen steady at 4.4%. The data will also include historical revisions that are anticipated to show a sizable downward adjustment to payrolls in the year through March 2025.

“A so-so jobs report probably won’t have much of an impact, but traders expecting stocks to bounce on weak numbers have to consider the possibility that a choppy stock market may simply treat good news as good and bad news as bad,” said Chris Larkin at E*Trade from Morgan Stanley.

In Friday’s consumer price index, economists will look for more evidence that inflation is on a downward trend. Meantime, figures on Tuesday are projected to show another month of solid retail sales.

Action in the US bond market was fairly muted following an earlier slide driven by news that Chinese regulators were said to be urging banks to curb Treasury exposure amid market risks.

The S&P 500 added 0.6%. A gauge of megacaps climbed 1.4%, outpacing small firms. The Dow Jones Industrial Average fluctuated above 50,000. The yield on 10-year Treasuries was little changed at 4.21%. The dollar fell 0.5%.

Oil gained as the US advised ships to steer clear of the Strait of Hormuz. UK assets saw a modest rebound, with Keir Starmer’s cabinet members voicing support for the prime minister. Japanese equities jumped to a record as Prime Minister Sanae Takaichi secured a historic election triumph.

For months, investors have been growing increasingly anxious about how AI will potentially transform the economy. Last week, those concerns suddenly spilled over into the stock market. The culprit was AI startup Anthropic, which released new tools designed to automate work tasks in various industries, sparking fears that the innovations would doom countless businesses.

The tumult left investors questioning some underlying assumptions. Is the economy really strong enough to support another year of double-digit gains? Will AI’s promise of productivity gains instead wreak havoc on entire industries? Are retail traders distorting markets, turning havens into hazards?

However, there’s little fundamental evidence of deterioration. In fact, in the eyes of Wall Street analysts, the outlook for profits is improving. Earnings for software and services companies in the S&P 500 are projected to rise 19% in 2026, up from projections for 16% growth, according to data compiled by Bloomberg Intelligence.

Valuation premiums for software have fallen to post‑global financial crisis lows even as analyst growth expectations embedded in those multiples remain elevated, reflecting uncertainty about future margins, according to Guillaume Jaisson and Peter Oppenheimer at Goldman Sachs Group Inc.

“Historically, during periods of major disruption, share prices tend to stabilize only once the earnings outlook becomes clearer,” they said.

The technology sector reset was a necessary digestion of prior gains, with the industry projected to record earnings-per-share growth of 32% in 2026, followed by an additional 20% in 2027, according to Sam Stovall at CFRA. That compares with the S&P 500’s projected gains of 13% and 16%, respectively.

“Should these EPS growth estimates continue to hold up, investors will be pleased they stayed the course,” he said.

“We think that the fourth quarter earnings season continues to be supportive for US equities,” said David Lefkowitz at UBS Global Wealth Management. “Solid growth, supportive central banks, and AI should be the key drivers of further upside for US stocks. We maintain our June 2026 and December 2026 S&P 500 price targets of 7,300 and 7,700.”

Meantime, this week’s employment data and CPI report may prove pivotal for the Fed as it balances slowing job growth against lingering inflation risks, according to Jason Pride and Michael Reynolds at Glenmede. A meaningful upside surprise in goods or services inflation could narrow the runway for rate cuts in 2026, they added.

“This week brings two of the most important economic data releases in the same calendar week, a rare occurrence due to the brief government shutdown earlier this month,” said Arthur Hogan at B. Riley Wealth. “That means both sides of the Federal Reserve’s dual mandate will be represented with fresh data.”

For each report, a “Goldilocks” outcome that implies solid growth and stable price pressures is the best case for the market, helping support stocks, according to Tom Essaye at The Sevens Report.

“Economic data has been almost perfectly Goldilocks since the government re-opened in late November and that needs to continue to help stocks weather rising AI skepticism,” Essaye noted.

National Economic Council Director Kevin Hassett said lower US jobs numbers can be expected in the months ahead as population growth slows.

“I think that you should expect slightly smaller job numbers that are consistent with high GDP growth right now,” Hassett said Monday on CNBC. “One shouldn’t panic if you see a sequence of numbers that are lower than you’re used to, because, again, population growth is going down and productivity growth is skyrocketing.”

Reports, on aggregate, continue to come in well ahead of expectations, with the Citigroup Economic Surprise Index recently surging to its highest level since 2023 before retreating modestly by week’s end, noted Mark Hackett at Nationwide.

Corporate Highlights:

Alphabet Inc. is looking to raise about $15 billion from a US high-grade dollar bond sale, adding to a borrowing spree by companies at the forefront of the artificial intelligence investment boom. Microsoft Corp. shares were downgraded for the second time in less than a week as Wall Street grows increasingly wary about the potential disruption software stocks face from artificial intelligence. Meta Platforms Inc. was given a European Union warning over policies that block the use of rival Artificial Intelligence assistants on WhatsApp, raising the possibility of further tensions with the Trump administration over the regulation of US tech companies. While most Americans were transfixed by this year’s Super Bowl proceedings on Sunday night, Elon Musk took to X to proclaim that SpaceX would focus on building out a base on the moon before sending humans to Mars. Eli Lilly & Co. agreed to buy closely held US biotech Orna Therapeutics Inc. for up $2.4 billion in cash, its second deal in as many days as the company expands its pipeline beyond its well-known blockbuster obesity drug Zepbound. Novo Nordisk A/S said it’s suing Hims & Hers Health Inc. for making knock-offs of its obesity medicines, even as Hims scrapped plans to sell a copycat version of the Wegovy pill. The US Food and Drug Administration said a TV advertisement for Novo Nordisk A/S’s new weight-loss pill included “false or misleading” claims about the drug’s ability to help users shed pounds, adding to the drugmakers’ recent woes. Kroger Co. plans to name Greg Foran as the supermarket chain’s next chief executive officer, according to a person familiar with the matter, as the nation’s largest grocer looks to carve a new path after a failed megadeal and an unexpected exit of its former boss. Apollo Global Management Inc. set a record in its business of making loans, a crucial plank in the firm’s ambition to become one of the largest underwriters on Wall Street. Workday Inc. announced co-founder Aneel Bhusri is returning to head the software company, replacing chief executive officer Carl Eschenbach after the company’s shares have plummeted over the past year. Cleveland-Cliffs Inc. sank after the US steel producer posted fourth-quarter earnings that missed analyst estimates. Shares of deep-water oil rig owner Valaris Ltd. surged after agreeing to be acquired for $5.8 billion in stock by rival Transocean Ltd. as offshore drilling heats up. Newmont Corp., a partner with Barrick Mining Corp. in its most important mines, wants the Canadian company to improve the operations before it spins off the assets and believes it has the power to potentially block the initial public offering, according to people familiar with the matter. Expand Energy Corp. said Domenic “Nick” Dell’Osso, Jr. stepped down as chief executive officer as the largest US natural gas producer plans to relocate its headquarters to Houston from Oklahoma City in mid-2026. NatWest Group Plc agreed to buy wealth manager Evelyn Partners, as the British bank looks to increase its access to affluent clients in its home market. Some of the main moves in markets:

Stocks

The S&P 500 rose 0.6% as of 12 p.m. New York time The Nasdaq 100 rose 0.8% The Dow Jones Industrial Average was little changed The Stoxx Europe 600 rose 0.7% The MSCI World Index rose 0.9% Bloomberg Magnificent 7 Total Return Index rose 1.4% Philadelphia Stock Exchange Semiconductor Index rose 1.7% IShares Expanded Tech-Software Sector ETF rose 2.9% The Russell 2000 Index rose 0.8% S&P 500 Equal Weighted Index was little changed Currencies

The Bloomberg Dollar Spot Index fell 0.5% The euro rose 0.7% to $1.1899 The British pound rose 0.4% to $1.3668 The Japanese yen rose 0.7% to 156.08 per dollar Cryptocurrencies

Bitcoin fell 0.8% to $70,119.77 Ether rose 0.2% to $2,096.78 Bonds

The yield on 10-year Treasuries was little changed at 4.21% Germany’s 10-year yield was little changed at 2.84% Britain’s 10-year yield advanced two basis points to 4.53% The yield on 2-year Treasuries declined one basis point to 3.49% The yield on 30-year Treasuries advanced one basis point to 4.86% Commodities

West Texas Intermediate crude rose 1.5% to $64.52 a barrel Spot gold rose 2.3% to $5,077.80 an ounce ©2026 Bloomberg L.P.