I’m Colette Auclair, and here is Schwab's early look at the markets for Friday, February 6.
With six of the Magnificent Seven in the books after Amazon reported late Thursday, investors look ahead to consumer sentiment data following a surprising surge in January layoffs. As stocks and cryptocurrencies continued their descent late this week, investors piled into more defensive positions, lifting the U.S. dollar and U.S. Treasuries.
Meanwhile, the broader market slipped into negative territory for 2026 despite a slightly positive January, and the S&P 500 Index heads into Friday down about 2% from last Friday's close. The tech-dominated Nasdaq 100 is in even worse shape, down about 4% from the end of January.
The market's terrible, horrible week continued late Thursday with Amazon initially falling 8% post-market after the company missed analysts' earnings expectations. Revenue and guidance were in line and Amazon Web Services cloud sales rose 24%, a sequential improvement. While missing earnings isn't a good sign, the quick plunge suggests investors are inclined to sell on any type of negative news, not a good omen.
General gloom could get reflected by today's University of Michigan's preliminary February Consumer Sentiment data, due at 10 a.m. ET. Consensus is for a headline of 54.3%, according to Briefing.com, down from January's 56% and historically low. Inflation expectations, which ticked up to 3.3% last month from 3.2% in December, are another area of focus.
If consumers are as gloomy, it could reflect a U.S. jobs market that's been relatively tepid for more than six months. The latest evidence came yesterday when January's Challenger job cuts data surged to the highest level since 2009 at 108,435. There was a "recession-like" spike in job cut announcements for the transportation industry last month, said Kevin Gordon, head of macro research and strategy, Schwab Center for Financial Research, or SCFR.
Also Thursday, the December Job Openings and Layoffs Survey, or JOLTS, offered no relief, falling to 6.542 million from 6.928 million the prior month, a new cycle low in the post-Covid economy. Weekly initial jobless claims rolled up to 231,000 from 209,000 the previous week, but continuing claims fell.
The data landed with a thud in a market that's increasingly as two-toned as a 1950's sedan. While the tech sector scurries lower and prevents major indexes from gaining, there's still strength beneath the surface. Over the last month, for example, the S&P 500 Index has barely moved, but eight of 11 S&P sectors were up through mid-week, with three gaining double-digits. Energy led, helped by geopolitical uncertainty and cold weather across the eastern U.S. that clipped production and raised demand.
But it's not simply energy and defensive sectors like staples doing well—at least until Thursday's wide sell-off. Materials rose nearly 12% from the start of the year through Wednesday's close, buoyed by the rally in silver and gold, while industrials gained from AI data center spending flowing through the economy. The Federal Reserve's statement last month was more bullish on growth, and manufacturing data for January showed an unexpected expansion.
Chips and software remained on the defensive Thursday. A shortage of memory chips has raised prices and hurt guidance for some major firms like Intel and Qualcomm, and software faces existential fears about intrusion by AI. In what may reflect short-covering, some chip stocks inched higher Thursday, but market leader Nvidia backtracked again to new six-week lows and Advanced Micro Devices extended Wednesday's dramatic losses following guidance that failed to ignite enthusiasm.
Concerns about heavy spending by mega-cap data center companies like Alphabet also weigh on tech, though in the longer run that sounds like it might be sunny news for companies that make the chips used in those AI functions. Alphabet plunged 4% early Thursday but clawed back most of its losses by the close. Still, it was among six Magnificent Seven stocks to fall Thursday.
Returning to the economy, investors will likely get a better sense of things next Wednesday when January's delayed nonfarm payrolls report arrives. Analysts expect relatively weak jobs growth in the 70,000 range, not improved much from 50,000 in December. Unemployment is seen steady at a low 4.4%, according to Briefing.com consensus.
Meanwhile, inflation remains a concern, stuck near 3%. Last week's hot December Producer Price Index, or PPI, could translate into trouble for the December Personal Consumption Expenditures (PCE) price index, due February 20. Some components of PPI that spill into PCE rose more than expected, and PCE is the Fed's favored read on inflation. Speakers from the Fed this week sounded generally uninterested in cutting rates anytime soon, though they will get two jobs reports between now and their next meeting in mid-March.
As of Thursday, chances of a rate cut at the Fed's March 17-18 meeting stood at 16%, according to the CME FedWatch Tool. A cut at that point, coming after the Fed paused rates last month, would likely reflect some obvious sign of economic deterioration. Although January's ISM Manufacturing PMI released Monday showed expansion, comments from survey respondents were generally "very somber," said Liz Ann Sonders, chief investment strategist at SCFR.
Japan comes into focus when voters turn out for elections Sunday, which could send volatility even higher on Wall Street. "Prime Minister Takaichi is likely to increase the majority for her coalition and pursue additional fiscal spending," said Michelle Gibley, director of international equity research and strategy, SCFR. "Finance Minister Katayama has said any cut to the consumption tax would not result in additional debt, but markets have been skeptical. In the end, policymakers are likely to comply with bond market demands if fiscal policies are imprudent."
More fiscal stimulus in Japan could raise yields there and threaten to send U.S. yields higher as Treasuries face more competition in the market.
The earnings pace slows after this week now that Amazon and Alphabet are out of the way. Retail sector earnings are the exception, picking up by mid-to-late February, and Nvidia reports February 25, more than two weeks from now.
In market action Thursday, selling spared few. In contrast to earlier this week when the major indexes got punished by mega-cap weakness but the remaining 490 or so stocks generally kept their heads above water, Thursday's torrid declines embraced all but two sectors: staples and utilities. Those are traditionally the two most closely associated with caution. The S&P 500 index finished well below its 50-day moving average of 6,877. It hadn't closed beneath that key support level since January 20, and before that December 17.
At points Thursday, the S&P 500 dropped under 100-day moving average of 6,796, the first time since mid-November it fell below that trend line. It hasn't closed under the 100-day since last spring's tariff tantrum, but closed barely above it Thursday.
Among sectors, consumer discretionary got hit hardest Thursday thanks in part to the day's disappointing jobs data. Info tech crumbled another 1.7%.
In individual trading Thursday, Qualcomm descended 8%. Like Intel a couple weeks ago, problems relate to a shortage of memory chips that hurt the company's forecast, CNBC reported. Quarterly results beat expectations but quarterly guidance fell short. Qualcomm expects the memory chip shortage to affect the entire consumer electronics industry as data centers compete for chips with smartphone and other device makers. Bank of America downgraded Qualcomm to neutral from buy, citing the "weak" handset market.
Not all the weakness Thursday belonged to tech. Luxury goods makers Ralph Lauren and Estee Lauder fell 4% and 21%, respectively. Pressure came from concerns over slowing sales from Ralph Lauren, while Estee Lauder plunged as restructuring charges and tariffs hit profits, Barron's reported. Shares of Estee Lauder were up 86% over the last year heading into Wednesday's close.
Eli Lilly, which ascended double digits Wednesday on strong earnings, rolled back most of those gains Thursday as Hims & Hers Health announced plans for a $49 weight loss pill. Lilly competitor Novo-Nordisk also dropped sharply, and Novo threatened legal and regulatory action against Hims and Hers, Bloomberg reported.
Crypto-related stocks Strategy and Coinbase also got slammed Thursday as bitcoin continued to suffer heavy selling. At its lows Thursday just above $64,000, it traded at roughly half the level of its October high. The question is how much effect crypto weakness is having on the broader market. Some analysts say the selling is contained, but it's also possible that investors heavily leveraged in crypto might face pressure to sell equities and other assets as they struggle with crypto losses.
Bitcoin hit its lowest level since mid-October 2024. In fact, bitcoin now trades at levels that persisted through much of 2024 before the November election.
Thursday had one sweet spot. Hershey rose 9% after beating analysts' estimates on earnings and outlook.
The Dow Jones Industrial Average® ($DJI) dropped 592.58 points Thursday (-1.20%) to 48,908.72; the S&P 500 Index (SPX) lost 84.32 points (-1.23%) to 6,798,40, and the Nasdaq Composite® ($COMP) fell 363.99 points (-1.59%) to 22,540.58.