Stock Market News for Feb 5, 2026

NEW YORK – The U.S. stock market delivered a fractured verdict on Wednesday, as a powerful rotation out of high-flying technology stocks and into value-oriented sectors cleaved the major indices. The Dow Jones Industrial Average climbed to a fresh record, while the tech-heavy Nasdaq Composite suffered its worst single-day percentage drop in over a month, a clear signal that investors are aggressively reassessing the sky-high valuations of artificial intelligence darlings.

The divergence highlights a growing anxiety in the market: that the breathtaking rally in a narrow group of AI-centric stocks has become overextended. Wednesday’s session, marked by exceptionally high trading volume, suggests a decisive shift in capital, with investors taking profits from growth and redeploying them into cheaper, more cyclical areas of the economy like energy and materials.

Market Snapshot: A Tale of Two Tapes

The day's trading action painted a starkly contrasting picture. The 30-stock Dow, a proxy for blue-chip, value-oriented companies, thrived as money flowed into industrial and consumer-focused names. Conversely, the Nasdaq was dragged down by the very mega-cap technology firms that have led the market for the past two years.

• Dow Jones Industrial Average (DJI): The index of established American companies rose a solid 0.5%, adding 260.31 points to close at a record 49,501.30. The strength was broad, with 23 of its 30 components finishing in positive territory.

• Nasdaq Composite: The tech-centric index tumbled 1.5%, shedding 350.61 points to finish at 22,904.58. The decline was driven by a sharp sell-off in the semiconductor sector, the heart of the AI boom.

• S&P 500: The broader market benchmark was caught in the crossfire, ultimately falling 0.5% to close at 6,882.72. The negative performance of its heavyweight tech components overwhelmed gains in other areas.

The Great Rotation Gains Momentum

Wednesday’s session was not just a minor shift but a significant acceleration of a trend that has been quietly building. Investors are methodically cashing in on the massive gains in the technology sector and seeking opportunities in parts of the market perceived as having more attractive valuations and being more closely tied to the real economy.

The sector performance data tells the full story of this capital migration.

• Cyclicals Lead the Way: The Energy Select Sector SPDR (XLE) was the day's standout winner, surging 3.2% as investors bet on sustained global demand. The Materials Select Sector SPDR (XLB) also posted a strong 2.1% gain, signaling optimism about industrial and manufacturing activity.

• Defensive Sectors Attract Interest: In a sign that some investors are also seeking shelter from volatility, defensive sectors performed well. The Consumer Staples Select Sector SPDR (XLP) advanced 1.6%, and the Utilities Select Sector SPDR (XLU) rose 1.5%.

• Technology Takes the Hit: The Technology Select Sector SPDR (XLK) was the session's biggest loser, falling 2.2%. It was followed by the Communication Select Sector SPDR (XLC), which contains several mega-cap tech and media names, dropping 1.6%.

• Fear Gauge and Volume Spike: Underscoring the day's decisive action, the CBOE Volatility Index (VIX), often called the market's "fear gauge," jumped 3.6% to 18.64. Furthermore, total trading volume hit 24.60 billion shares, significantly higher than the 20-session average of 19.90 billion, confirming that the rotation was backed by strong conviction.

Earnings Spotlight: The Peril of Sky-High Expectations

Nowhere was the market's new mood more apparent than in the reaction to corporate earnings, where even spectacular results from a tech leader were met with punishment.

AMD: A Victim of Its Own Success

Advanced Micro Devices (AMD) became the poster child for the market's anxiety over AI valuations. The chipmaker delivered a blockbuster earnings report that, in a different environment, would have likely sent its stock soaring.

• Stellar Financials: AMD reported fourth-quarter 2025 non-GAAP earnings of $1.53 per share on revenues of $10.27 billion, handily beating consensus estimates.
• Explosive Growth: These figures represented a staggering 40.4% year-over-year jump in earnings and a 34.1% increase in revenue, fueled by its cutting-edge AI chip portfolio.
• Solid Outlook: The company guided for first-quarter 2026 revenue of approximately $9.8 billion, implying robust 32% year-over-year growth.
• The Market's Brutal Verdict: Despite these outstanding results, AMD's stock plummeted 17.3%. The reaction was a clear message: investor expectations had become so euphoric that even exceptional performance was not enough. The bar had been set at an impossible height.

Amgen: Value and Solid Execution Rewarded

In stark contrast, biopharmaceutical giant Amgen demonstrated the appeal of value and steady execution in the current climate.

• Consistent Performance: Amgen reported adjusted Q4 earnings of $5.29 per share and revenues of $9.9 billion, beating analyst estimates on both fronts.
• Positive Reception: Investors rewarded the company's reliable 9% year-over-year revenue growth and more reasonable valuation, sending the stock price up 8.2%. The performance illustrates a clear preference for tangible, predictable results over speculative growth narratives.

What to Watch Next

Wednesday’s dramatic session solidifies sector rotation as the market's dominant theme. The central question for investors is whether this is a temporary correction within a tech-led bull market or the start of a more sustained period of leadership for value and cyclical stocks.

• Upcoming Tech Earnings: The market will be laser-focused on the next wave of earnings from AI-related companies. Another "beat-and-drop" reaction similar to AMD's could cement the negative sentiment and trigger further selling in the sector.

• Economic Indicators: Key data on inflation and employment will be critical. Any signs of stubborn inflation or a weaker-than-expected economy could further challenge the case for high-valuation growth stocks.

• The Dow's Trajectory: The Dow's ability to hold its recent gains and challenge the 50,000 psychological milestone will serve as a key barometer for the strength and durability of the value trade.

• Capital Flows: Analysts will be monitoring weekly fund-flow data for continued evidence of a structural shift from growth-focused funds into their value- and cyclical-oriented counterparts. For now, the message from the market is clear: valuation matters again.