Week:
S&P500: -1.2% FTSE100: +0.7% Gold: +0.6% Bitcoin: -0.5%
YTD:
S&P500: -0.3% FTSE100: +5.0% Gold: +16.7% Bitcoin: -21.6%
Strong Data, Soft Landing Hopes, but Tech Fatigue Persists
Source: Connect Weekly | Week ending 7 February 2026
US equities closed the week lower despite another batch of solid economic data, as investors wrestled with fading rate-cut expectations and continued AI-sector volatility. The S&P 500 hovered near record territory early in the week before momentum stalled. Small caps outperformed, while megacap tech continued to show signs of fatigue. Crypto remained volatile, with bitcoin sliding below $70,000 before stabilising.
What drove markets this week
Monday began positively, with the S&P 500 climbing toward record highs as a strong January ISM Manufacturing print boosted confidence in the economic outlook. Airlines rallied as oil prices eased, critical minerals surged on news of a proposed $12 billion US stockpile, and chip-adjacent names found support. However, crypto remained fragile after its weekend rout.
Tuesday brought hesitation. Weaker-than-expected retail sales and anticipation ahead of delayed labour data kept traders cautious. Software names staged a brief rebound, while semiconductors softened as capital rotated away from hardware into beaten-down growth. Nvidia remained under pressure as geopolitical chip restrictions lingered.
Jobs shock recalibrates rate bets
Wednesday’s blockbuster January payroll report showed 130,000 jobs added versus expectations of 65,000. While unemployment ticked lower, the strength reinforced expectations that the Fed may hold steady in March. The S&P 500 finished flat, the Nasdaq 100 edged higher, and the Russell 2000 slipped. Markets interpreted the data as strong but not inflationary, a narrow balance that kept equities contained rather than euphoric.
AI anxiety returns midweek
Thursday saw renewed pressure on tech as investors reassessed AI monetisation risks. Despite solid earnings from select infrastructure players, hyperscalers and software names struggled. Defensive sectors outperformed, while bitcoin briefly dipped below $67,000. The VIX firmed as markets awaited Friday’s inflation data.
Friday: Inflation steady, rally fades
January core CPI landed broadly in line with expectations, showing no renewed inflation spike. Stocks initially rallied, but gains faded into the close. The S&P 500 eked out a small gain on the day, the Nasdaq 100 rose modestly, and the Russell 2000 jumped 1.2%. Despite Friday’s bounce, all three indices posted weekly losses. AI infrastructure names outperformed late in the session, while Mag 7 stocks, aside from Tesla, continued to lag. Bitcoin staged a modest relief rally.
Looking ahead
The macro backdrop remains supportive, but the combination of resilient labour data and stable inflation suggests the Fed may remain patient rather than aggressive. Small caps continue to benefit from easing optimism, while megacap tech is undergoing a selective reset. As earnings season matures, investors appear more willing to reward clear profitability and cash flow than long-duration AI narratives alone.
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