At TM3 Wealth, it is important to us that you stay informed about the forces shaping today’s markets. Here’s what we believe deserves your attention this month. If you have any questions or would like to discuss these topics further, please reach out to your advisor.
U.S. equity markets delivered a dramatic stretch of volatility in early February, defined by a historic milestone, a sharp sector rotation, and a tug-of-war between encouraging economic data and rising concerns about artificial intelligence disruption. The Dow Jones Industrial Average crossed 50,000 for the first time on February 6, a historic milestone reflecting broadening market participation beyond the mega-cap technology names that dominated much of the prior two years. The advance was fueled by strong quarterly earnings, resilient economic data, and a rotation into industrials, financials, and healthcare stocks. However, the rally proved short-lived. A deepening selloff in software and technology shares, driven by growing investor concern that artificial intelligence could disrupt traditional software business models, weighed heavily on the Nasdaq and S&P 500.
The dominant storyline weighing on sentiment has been the growing fear that artificial intelligence tools may disrupt, rather than simply enhance, established business models. New enterprise-focused plugins from AI developer Anthropic, tailored for legal, finance, and marketing workflows, triggered a broad selloff in software-as-a-service stocks that wiped roughly $1 trillion from the sector over recent weeks1. The move reflected a deeper reassessment of the AI buildout: investors are increasingly unsure when massive spending will translate into durable profits, and worried that automation could pressure margins across industries.
On the economic front, the week delivered a mixed but generally constructive picture. The January jobs report landed with an upside surprise, showing job gains of 130,000, while the unemployment rate ticked down to 4.3% from 4.4%2. The report also included final benchmark revisions that cut roughly 862,000 jobs from the prior year’s totals, confirming that hiring in 2025 was far weaker than initially reported2. Even so, the firm January reading effectively erased any remaining odds of a March rate cut, with futures markets now pointing to June at the earliest3. Inflation data offered some relief as the January Consumer Price Index (CPI) came in softer than expected, with headline inflation slowing to 2.4% year-over-year and core CPI easing to 2.5%, its lowest since early 20214. Still, December retail sales were flat, missing forecasts for a 0.4% gain and raising questions about consumer resilience in early 20265.
The bottom line: Despite the week’s volatility, the underlying fundamentals of the U.S. economy remain intact. The labor market is holding up better than many expected, inflation is moving in the right direction, and corporate earnings continue to grow at a healthy pace. The key tension for markets going forward will be how quickly AI-driven disruption reshapes sectors and whether that transformation ultimately boosts productivity broadly or simply compresses valuations in the industries caught in its path.
Sources:
- Reuters, https://www.reuters.com/business/media-telecom/global-software-stocks-hit-by-anthropic-wake-up-call-ai-disruption-2026-02-04/
- Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
- CME Fed Watch Tool, https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
- Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
- US Census Bureau, https://www.census.gov/retail/sales.html
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Definitions:
The S&P 500® Index, or the Standard & Poor’s 500® Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.
The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
The Nasdaq-100 is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. It is a modified capitalization-weighted index.
JOLTS stands for the Job Openings and Labor Turnover Survey, a monthly report from the U.S. Bureau of Labor Statistics (BLS) that provides crucial insights into labor market dynamics like job vacancies, hirings, and separations (quits, layoffs, discharges).
The unemployment rate represents the number of unemployed people as a percentage of the labor force (the labor force is the sum of the employed and unemployed).
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
The Retail Sales report, published monthly by the U.S. Census Bureau, measures the total receipts of retail stores from goods and services sold to consumers. It serves as a key indicator of consumer spending, which drives a significant portion of the U.S. economy.
The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.
The United States Census Bureau (USCB) is a principal agency of the U.S. Federal Statistical System, responsible for producing data about the American people and the economy.
The CME FedWatch Tool is a tool created by the CME Group (Chicago Mercantile Exchange Group) to act as a barometer for the market’s expectation of potential changes to the fed funds target rate while assessing potential Fed movements around Federal Open Market Committee (FOMC) meetings.
