February 3, 2026

The rotation out of technology stocks and into more cyclical sectors picked up steam today as the NASDAQ tumbled lower, while the broader market closed mixed. Despite the major averages finishing in the red, the DJ Transportation Index hit a new high and the small cap Russell 2000 also settled higher. The DJIA briefly touched a new high with Dow components Verizon (VZ), Walmart (WMT), Chevron (CVX) and Merck (MRK) outperforming. The selloff in tech shares pulled the Dow Jones lower in the afternoon as Salesforce (CRM -6.85%), International Business Machines (IBM -6.49%) Microsoft (MSFT -2.87%) and Nvidia (NVDA -2.84%) were sharply lower. Earnings were a mixed bag with Merck (MRK), Teradyne (TER), PepsiCo (PEP), Illinois Tool Works (ITW) and Palantir (PLTR) posting strong results that beat estimates, while PayPal (PYPL), NXP Semiconductor (NXPI) and others were punished for disappointing. The iShares Tech-Software ETF (IGV) dropped another -4.61% and is down about -24% from its high. Private Equity firms were also hit hard including Apollo Mgt (APO), Blackstone (BK), KKR (KKR) and Carlyle Group (CG) as they have invested heavily in software firms over the last decade. Crypto currencies dropped lower with Bitcoin falling below $75k before recovering some of the loss. Crude oil jumped on escalating tensions between the US and Iran, and an agreement between the US and India to limit oil purchases from Russia. The Energy (XLE) sector was a bright spot spiking +3.24%, while Materials (XLB), Consumer Staples (XLP) and Utilities (XLU) were also strong. The Technology (XLK) sector sank -2.23% followed by weakness in Communication Services (XLC) and Healthcare (XLV). The major averages were able to trim their losses late leaving the Dow Jones down 166.67 points (-0.34%) at 49240.99, while the S&P 500 lost 58.63 points (-0.84%) closing at 6917.81. The NASDAQ dropped 336.92 points (-1.43%) and settled at 23255.19. The small cap Russell 2000 gained +0.31%.

Breadth was mostly positive with advancing issues beating declining issues by 199 units on the NYSE, but declining issues had a 7:5 edge on the NASDAQ. Volume was heavy with advancing volume 56% on the NYSE and 51% of the NASDAQ. The VIX added 1.66 (+10.16%) and closed at 18.00. Crude oil prices popped 2.01 (+3.23%) and the March contract closed at $64.15 a barrel. Gold prices spiked 308.10 (+6.62%) and finished at $4961.90 an ounce. Bitcoin (BTC) closed the session at $76,360.

The rotation on going in the market is evident in positive underlying breadth and the fact that several indexes are posting new highs. Unfortunately, if you're buying the dip in technology shares you're in the wrong sector and probably too early. The S&P 500 was able to bounce off its 50-day MA today which is a positive and the NASDAQ, though it briefly slipped below its 100-day MA, was able to close back above that key support area. Although Congress settled the government shutdown this afternoon, some economic data will again be delayed including Friday's BLS jobs report. However, the ADP Employment Report will be out preopen and will give investors some guidance as to whether the jobs market remains stable.

Earnings releases to watch for on Wednesday include: AbbVie (ABBV), Eli Lilly (LLY), Johnson Controls (JCI), Phillips 66 (PSX), Stanley Black & Decker (SWK), Timken (TKR), Uber (UBER), Alphabet (GOOGL), Align Technologies (ALGN), Allstate (ALL), McKesson (MCK), Murphy USA (MUSA) and Qualcomm (QCOM).

Wednesday's Market Moving Economic Calendar: Mortgage Apps, ADP Employment Report, ISM Services Index and EIA Petroleum Status Report.

*Charts of the various market timing components can be found by going to the Market Edge Home page and clicking on 'Market At A Glance', which is located on the right-hand side of the page just below the 'Market Recap' section.

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