Big Tech Bets Hit by Rotation as Small Caps Rally: Markets Wrap
(Bloomberg) — Sharp cross-currents buffeted US stocks beneath a placid surface Thursday, as last year’s technology winners sold off and investors dove into energy producers, consumer companies and small caps. An advance in global bonds stalled.
The Nasdaq 100 slid 0.6%, ending a three-day advance as tech behemoths Nvidia Corp. and Apple Inc. slumped while the S&P 500 was little changed. Defense shares jumped on President Donald Trump’s plan to ramp up military spending while a gauge of small-cap stocks surged to a record as investors continued to rotate out of tech.
The first few sessions of 2026 have seen a notable broadening of the stock market winners list as megacap tech’s grip loosened and industries usually keyed to an expanding economy ran ahead. Altogether it’s amounted to one of the more extreme rotations of its kind: The Russell 2000 has beaten the Nasdaq 100 by around 4 percentage points in the first five sessions of 2026, the second-best outperformance to start a year on record.
“It’s unclear at this point whether this is just a breather or a full rotation. Markets are still trying to figure out a direction – economic data and forecasts are quite optimistic, but US markets have ripped for 3 years in a row,” said Paul Ticu at Calamos Investments. “Question is whether this is just the market trying to decide on a direction — and potentially do more of the same — or the beginning of a broader rotation.”
Earnings growth for small-cap firms is poised to outpace large-caps after years of underwhelming fundamentals, according to Francis Gannon, co-chief investment officer at Royce Investment Partners.
“Small caps have the relative valuation story and they have the earnings story,” he said. “It’ll be the beginning of a long cycle for small caps because they’ve been so out of favor since a long period of time.”
Defense names also outshone the broader market with Lockheed Martin Corp. and Kratos Defense & Security Solutions Inc. rising after the US president signaled plans to raise military spending to $1.5 trillion in 2027.
“We see this as an aspirational target to shape the direction of future legislative debates around appropriations,” says Evercore ISI’s Sarah Bianchi. “Moving funds at this scale without Congress would be a massive stretch, even for this Administration.”
The rally in government debt hit pause. The yield on 10-year Treasuries rose to 4.18% after announced layoffs at US companies dropped to a 17-month low in December, potentially easing fears of a sharper slowdown in the economy. Weekly jobless claims rose less than expected.
“We see a bit of a profit-taking after a couple of days and I think geopolitical risk remains quite high,” said Nataliia Lipikhina, head of EMEA equity strategy at JPMorgan Private Bank. “The market is now really positioning for the upcoming earnings season.”
Investors are also awaiting US payrolls data on Friday as they assess the likely path for interest rates this year. Money markets are pricing in at least two quarter-point cuts. Geopolitical tensions are high on the agenda too, with markets monitoring efforts to bring Greenland under Washington’s control and developments surrounding Venezuela.
“Markets are taking a breather after a strong start to 2026, and no one wants to add fresh risk ahead of Friday’s US jobs report,” said Charu Chanana, chief investment strategist at Saxo Markets. “The Fed debate isn’t settled yet, and regional security headlines are keeping positioning cautious.”
A selloff in precious metals slowed as silver pared a drop below $75 an ounce. Investors have been positioning for an annual rebalancing of commodity indexes that will see futures contracts worth billions of dollars sold in the next few days.
Spot gold rebounded after dipping below $4,450 an ounce. The yellow metal lost nearly 1% in the previous session.
What Bloomberg strategists say…
“Gold and silver are facing near-term pressure as investors prepare for annual commodity index rebalancing, adding a technical drag to strong rallies in precious metals. They arrive when positioning remains stretched after record gains, increasing the risk that mechanical selling weighs on prices in the short term.”
—Nour Al Ali, Markets Live strategist. For full analysis, click here.
Meanwhile, corporations and governments in the US, Europe and Asia have borrowed roughly $260 billion across currencies by the close of business on Wednesday, the highest tally on record for the comparable period, according to data compiled by Bloomberg.
A further barrage of bond offerings is poised to push that number higher. At least 23 issuers are expected to price bonds in Europe’s primary market, raising at least €51.8 billion ($60.4 billion), according to data compiled by Bloomberg. In Asia, China announced plans to issue about $75 billion of bonds early this month.
Corporate News:
ConocoPhillips, Exxon Mobil Corp. and other US oil companies are examining what role they can play Paramount Skydance Corp. reaffirmed its offer to buy Warner Bros. Discovery Inc. for $30 a share, insisting its hostile bid is superior to one from Netflix Inc. despite multiple rejections by Warner Bros.’ board. Revolution Medicines shares fell after AbbVie says it’s not in talks to buy the cancer-drug developer. Samsung Electronics’s profit jumped a better-than-projected 208%, driven by surging global demand for AI servers that sharply lifted memory chip prices. Shell Plc said its oil trading performance significantly worsened in the fourth quarter as crude prices slumped. Tesco Plc’s shares slid around 7% after Britain’s largest supermarket chain posted softer-than-expected like-for-like growth in its core market over the Christmas period. Some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 4:01 p.m. New York time The Nasdaq 100 fell 0.6% The Dow Jones Industrial Average rose 0.6% The MSCI World Index fell 0.2% The Russell 2000 Index rose 1.1% S&P 500 Equal Weighted Index rose 0.9% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.2% to $1.1651 The British pound fell 0.2% to $1.3437 The Japanese yen fell 0.1% to 156.97 per dollar Cryptocurrencies
Bitcoin fell 0.2% to $90,840.25 Ether fell 1.3% to $3,106.87 Bonds
The yield on 10-year Treasuries advanced four basis points to 4.18% Germany’s 10-year yield advanced five basis points to 2.86% Britain’s 10-year yield declined one basis point to 4.40% Commodities
West Texas Intermediate crude rose 4.6% to $58.57 a barrel Spot gold rose 0.5% to $4,478.50 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Andre Janse van Vuuren, Anand Krishnamoorthy, Kwaku Gyasi and Subrat Patnaik.
©2026 Bloomberg L.P.
