Weekly Market Update – February 6, 2026

Quick Takes

• Wall Street wrapped up a choppy trading week with investors wrestling over whether big tech’s massive spending spree on Artificial Intelligence (AI) will pay off—or backfire. Smaller and more value-oriented companies outperformed the major indexes which were mixed.
• The Nasdaq Composite ended the week down -1.8%, the S&P 500 dipped -0.10%, but the small-cap Russell 2000 added +2.2%. In other notable moves, the S&P MidCap 400 rose +4.4% and the Russell 1000 Value beat its growth counterpart by over 4 percentage points.
• A wave of new labor data showed that the once resilient U.S. job market is now losing momentum. Despite the labor gloom, business activity showed signs of expansion as the ISM Manufacturing PMI rose to 52.6 in January, its highest level since 2022.

Source: Bloomberg. Data as of February 6, 2026.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Tech Jitters and Labor Pains Leave Markets Mixed

U.S. Stocks: Tech Tumbles While Smaller Cap and Value Stocks Rally

Like their domestic counterparts, non-U.S. equities were mixed last week. The developed markets MSCI EAFE Index continues to beat the S&P 500, gaining +0.5% for the week after rising +1.6 the previous week. That was its 11th consecutive positive week. The MSCI Japan Index led developed markets again with a +1.8% gain, and the MSCI UK Index added +0.8% to the prior week’s +1.6% gain—extending its own winning streak to eleven weeks. Domestic sentiment in Japan was largely optimistic ahead of the country’s general elections on February 8. The European Central Bank and the Bank of England (BOE) held rates steady last week, and the BOE opened the door to resuming its easing cycle after cutting its inflation forecast.

Emerging markets trailed as the MSCI Emerging Markets Index was down -1.4%, its first negative week since mid-December. The MSCI China Index sank -3.9%, which weighed on the overall Emerging Markets index at about 27% of the benchmark. The MSCI Asia Ex-Japan Index was down -1.9 as well. On the other hand, the MSCI Latin America Index continues to be a positive contributor with a +1.6% return for the week. The US dollar was up +0.7%, offsetting the prior week’s -0.6% drop and providing a headwind for non-US markets.

International Stocks: Developed Markets Rise While Emerging Markets Fall

In what has become a fairly persistent pattern, non-US equities again outperformed their domestic counterparts. The developed markets MSCI EAFE Index was up +1.6% for the week, its tenth consecutive positive week. The MSCI UK Index led developed markets with a +1.6% gain, extending its own winning streak to ten weeks. Most other European nations were up as well. The eurozone economy grew +1.5% in 2025, not spectacular but up nicely from +0.9% in 2024, and above the European Commission’s (EC) forecast for +1.3%. 

Emerging markets led global stocks as the MSCI Emerging Markets Index was up +1.8% following the previous week’s +1.1% gain. It is on a six-week win streak and has been positive in nine of the last ten weeks. The MSCI China Index rebounded +0.7% from the prior week’s -0.5% dip. The MSCI Asia Ex-Japan Index was up +2.0% in US dollar terms, and the MSCI Latin America Index rose +1.1%. The US dollar was down -0.6%, following the prior week’s -1.8% drop, providing a tailwind for non-US markets.

Bonds: Treasury Yields Fall on Weak Labor Data

Disappointing labor data pushed bond yields lower by -2 to -3 basis points across most maturities, sending U.S. Treasuries to positive returns for the week. The 2-year US Treasury yield ended at 3.50%, the 10-year US Treasury yield closed at 4.21%, and the 30-year US yield was at 4.85%. While investment-grade corporate bonds also posted gains, they trailed behind Treasuries, and high-yield bonds faced pressure from softening macroeconomic sentiment. Overall, the Bloomberg US Aggregate Bond Index returned +0.3% for a second straight week. Non-US bonds, as measured by the Bloomberg Global Aggregate ex US Bond Index, were down -0.6% following a +1.3% return the prior week.

Economy: Labor Market Shows Cracks as Layoffs Spike

A wave of new labor data showed that the once-resilient U.S. job market is now losing momentum.

Hiring Slows

• Private-sector payroll processor ADP reported just 22,000 new jobs in January, well below expectations for 45,000 and down from 37,000 in December.
• For all of 2025, ADP counted 398,000 new private-sector jobs, a sharp drop from 771,000 in 2024.

Job Openings Fall
The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) showed:

• 6.542 million openings in December—the lowest since September 2020.
• Hires edged up slightly, but layoffs increased.

Weekly Jobless Claims

• 231,000 new claims, up from 209,000 the week before and above expectations.

Layoffs Surge
Consulting firm Challenger, Gray & Christmas reported:

• 108,000 U.S. job cuts in January, a 118% year-over-year increase and a 205% jump from December.
• It was the highest January total since 2009—and the biggest monthly total since October 2025.

Manufacturing and Services Show Economic Expansion
Despite the labor gloom, business activity showed signs of expansion:

• Manufacturing: The ISM Manufacturing PMI rose to 52.6 in January, its highest level since 2022, signaling a return to growth after a long period of contraction.
• Services: The sector marked its 19th consecutive month of expansion, with the ISM Services PMI holding steady at 53.8 and all subindexes remaining in expansion territory.

The Bottom Line

This week highlighted a clear divide: mega-cap tech is facing scrutiny over its massive AI bets, while smaller companies, value stocks, and bonds are finding favor. The mixed jobs data gave bondholders a boost but reminded stock investors that economic growth is cooling. For retail investors, the rotation toward value and cyclical areas may offer opportunities outside the familiar tech giants — though volatility is likely to stick around until the next round of tech earnings sheds more light on whether the AI spending spree is sustainable.

Chart of the Week

On Monday, the Institute for Supply Management (ISM) reported that its Manufacturing PMI jumped to 52.6% in January from an unrevised 47.9% in December. That was the best level since August 2022 and was far above Wall Street expectations for it to rise to 48.5%. That ends 11 consecutive months below 50.0% (above 50% indicate economic expansion, levels below 50% indicate contraction). Of the six largest manufacturing industries, five—transportation equipment; machinery; chemicals; food, beverage and tobacco products; and electronics—expanded in January. New Orders, a sign of future demand, drove the overall improvement, surging to 57.1%, the highest since February 2022, from 47.4% the previous month. The Production index jumped to 55.9% from 50.7% in December. The New Export Orders index elevated to 50.2% from 46.8%.  The Employment index rose to 48.1% from 44.8%. The Prices index, a measure of inflation, edged up to 59.0% from 58.5%. The key takeaway from the report is that despite stubborn inflation, manufacturing activity is showing strength as 2026 gets under way. 

Two days later, ISM reported that their Services PMI was unchanged in January at 53.8% after the prior month was revised lower from 54.4%. That is the 19th consecutive month in expansion and beats expectations to come in at 53.5%. Service-oriented companies, such as restaurants and retailers, employ the majority of Americans. The New Orders dropped to 53.1% from 57.9% the prior month but the Production component rose to 57.4% from 55.2%. The Employment component fell to 50.3% from 51.7%. The Supplier Deliveries index increased to 54.2% from 51.8% and the Backlog of Orders component improved to 44.0% from 42.6%. The Prices index rose to 66.6% from 65.1% the prior month. Overall, the report showed the important service sector economy growing at a steady pace, though prices continue to increase.

A Huge Surge in New Orders Sent U.S. Manufacturing Activity Near 4-Year Highs

ISM Manufacturing Index and Manufacturing New Orders (Jan 2010 – Jan 2026)

Source: Institute for Supply Management (ISM), Briefing.com.

The Week Ahead

Due to a delay from last Friday from the abbreviated government shutdown, the Bureau of Labor Statistics (BLS) will release the January jobs report on Wednesday. The BLS also releases the Consumer Price Index (CPI) on Friday. That means both sides of the Federal Reserve’s dual mandate will be represented with fresh data. 

Those will be the headline reports in an otherwise light week of data. Other economic releases include Retail Sales for December on Tuesday, along with NFIB Small Business Sentiment, the Employment Cost Index and Import & Export Prices. Thursday brings Existing Home Sales for January.

Earnings season rolls on with about 78 more S&P 500 index companies set to report this week. Of the roughly 300 companies that have reported so far, nearly 80% have beaten earnings-per-share estimates, while just over 70% have exceeded revenue expectations. Coca-Cola, CVS Health, and Ford Motor announce results on Tuesday, followed by Cisco Systems, McDonald’s, and T-Mobile on Wednesday. Airbnb, Applied Materials, and Arista Networks release results on Thursday.

Did You Know?

NEW S&P MILESTONE – The S&P 500 crossed above 7,000 for the first time ever in trading on January 28. It took 6,049 days — from February 1998 to August 2014 — for the index to double from 1,000 to 2,000, while it took only 443 days for the index to move from 6,000 to 7,000. One year after the S&P first closed above each 1,000-point threshold, it averaged a gain of +12.6%. (Source: Bespoke)

SOFTWARE SLIDE – The S&P 500 Software Group entered bear market territory on January 29 with a drop of more than-20% from its all-time closing high on 10/28/25. Over the same period, the S&P 500 was exactly flat, highlighting increased worries that AI will take business from large-cap software firms in the years ahead. (Source: Bespoke)

STOCKS UP, DOLLAR DOWN – On January 26, the S&P 500 closed at a 52-week high, and the U.S. Dollar Index closed at a 52-week low on the same day for the 21st time since 1971. Six months after the prior 20 occurrences, the U.S. Dollar Index had a median decline of -0.4% with gains 45% of the time, while the S&P 500’s median gain was +7% with positive returns 90% of the time. (Source: Bespoke)

This Week in History

TULIPMANIA – On February 5, 1637, “Tulipmania,” one of the first and strangest speculative bubbles, hit its peak in the Netherlands. The price of the rare Witte Croonen tulip bulb soared +2,506% in 33 days. (Source: The Wall Street Journal)

Economic Review

• The final reading for the S&P Global US Manufacturing PMI improved in January to 52.4, extending the streak above the key 50.0 expansion level to 36 months. That was up from the 51.9 flash estimate two weeks ago and the 51.8 final reading for December. A year ago it was 51.2. Output (Production) rose to 55.2 from 53.6 the prior month, the highest reading since August 2025. New Orders posted a modest rebound after declining in December for the first time in a year, however growth was modest. Export Orders fell for a 7th straight month, and Employment remained in expansion but fell from the prior month and is at the lowest level since October. Inflationary pressures remain, but the sharpest rise in Output Prices since August 2025 was somewhat offset by Input Prices showing a cooling trend. January’s rise in manufacturing prices was the second weakest recorded over the past 11 months, albeit up slightly in December. This slower cost growth could take some pressure off selling prices in the coming months. Confidence in the Outlook, although still running just below the long-run trend level, is holding up. Firms generally anticipate improving demand, thanks in part to lower interest rates, reduced import competition due to tariffs, and more government support. 
• The S&P Global US Services PMI ticked up in January to 52.7 from 52.5, which was the preliminary reading two weeks ago and the final reading for December. That extended the streak above the key 50.0 expansion level to 36 months. A year ago it was 52.9. While business activity and new orders showed improvement, the sector faced significant headwinds from a sharp decline in foreign demand and persistent inflationary pressures linked to tariffs. New Orders rose to 53.0 from 50.8 in December, in expansionary territory for 21 straight months now. Employment growth improved to 50.6 after dipping to contraction in December at 49.9, which ended eight months of expansion. Inflationary pressures in the service sector, meanwhile, remain elevated. Though up from the prior month, Input Costs saw the slowest rise since October, driven by tariff-related price increases and wage growth. Output Prices were also up but less than Input Costs, moderating in pace amid stiff competition. Business Confidence was positive but subdued, falling to a 3-month low.
• Outstanding US Consumer Credit increased by $24.045 billion in December (+5.7%), far above expectations for a +$8.0 billion increase, and up sharply from $4.698 billion (+1.1%) the prior month (revised up from the initially reported +$4.229 billion). The December expansion was the biggest since March 2025 and amounted to a year-over-year rate of +3.3%, down from the +2.2% annualized growth rate the prior month. Growth for revolving credit, such as credit cards, jumped +12.6% for the month, after falling -1.5% the previous month. Nonrevolving credit, which tends to be much less volatile than revolving credit and includes auto as well as school loans, rose +3.2% following the prior month’s +2.0% increase. The data from the Federal Reserve is not adjusted for inflation and does not include mortgage loans, which is the largest category of household debt.
• The Bureau of Labor Statistics reported the December Job Openings Labor Turnover Survey (JOLTS) showed that Job Openings were just 6.542 million, well short of Wall Street estimates for 7.250 million, and down from 6.928 million the prior month (revised lower from 7.146 million). The decline was seen most in retailers, financial companies and professional businesses that employ many workers.  The Number of People Quitting Jobs was 3.204 million, up from 3.193 million the prior month (revised up from 3.161 million). The record was 4.5 million job quitters in late 2021. The Hiring Rate ticked up to 3.3% from 3.2%. The hiring rate typically ranges from 3.7% to 4.0% in a strong economy. The Quits Rate was unchanged at 2.0%. People tend to quit less often when the economy softens and jobs become harder to find. The Layoffs Rate was also unchanged, remaining at 1.1% and below the 1.4% annual average from 2010 to 2019.
• The preliminary reading of the University of Michigan Consumer Sentiment Index increased to 57.3 from a final reading of 56.4 the prior month and easily beat expectations for a decline to 55.0. In the same period a year ago, the index stood at 64.7. The Current Economic Conditions component jumped to 58.3 from 55.4 the prior month. The Consumer Expectations component slipped to 56.6 from 57.0 the prior month. One-year inflation expectations fell to 3.5% from 4.0%, under expectations to come in at 4.0%. The five-year inflation expectations was 3.4%, up a tick from 3.3% the prior month. The report shows a meaningful surge in February consumer sentiment, just a week after consumer confidence for January showed a surprise decline.
• Weekly MBA Mortgage Applications fell -8.9% for the week ending January 30 after falling -8.5% the prior week. The Purchase Index sank -14.4% after slipping -0.4% the prior week. The Refinance Index fell -4.7% after dropping -15.7% the prior week. The average 30-Year Mortgage Rate slipped to 6.21% from 6.24% the prior week.
• Weekly Initial Jobless Claims rose +22,000 to 231,000 for the week ending January 30, worse than expectations for 212,0000. The prior week was unrevised. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose +25,000 to 1,844,000 for the week ending January 24, which was better than expectations for 1,850,000. The prior week’s reading was revised lower to 1,819,000 from 1,827,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.