A jam-packed week of major economic data and more earnings reports began on Monday with Japanese stocks reaching all-time record highs after the weekend’s landslide election victory of prime minister Takaichi’s ruling Liberal Democratic Party. Meanwhile, the sprawling Epstein scandal engulfed Commerce Secretary Lutnick and the related political crisis in the UK drove local interest rates meaningfully higher.

The feel-good vibes from the previous Friday’s dramatic stock turnaround on Wall Street continued into Monday’s session with the bulls back in control and the indexes made up more of the ground lost during the three-day tech wreck of February 3rd-5th, pulling the S&P 500 back to within touching distance of yet another all-time record high.

After another upbeat session in Asia where stocks are outperforming US equities by the most this century, a mixed premarket on Wall Street on Tuesday saw underwhelming earnings from Coca-Cola, a solid report from Spotify and a disappointing December Retail Sales number.

Stocks seemed undecided about how to proceed, obviously totally dismissing Trump’s idiotic prediction of a 15%+ GDP increase this year (it’s currently running at a historically quite high level of 4.4%). In the end the indexes went nowhere, closing fractionally lower. Interest rates continued to sink.

Jobs Report day dawned on Wednesday and when the numbers dropped pre-market, we got a positive blowout which pushed back on the prior week’s gloomy labor market statistics that had helped contribute to the mini-crash in the indexes.

New job creation in January obliterated estimates (with particularly robust employment in education and healthcare) and the overall unemployment rate fell to 4.3%. This signal of economic strength initially boosted stock prices and interest rates briefly spiked back higher as the data poured cold water on the need for any more imminent Fed Funds Rate cuts.

But attention quickly shifted back from trading headlines to more general themes like where we are on tariffs (six House Republicans voted with Democrats to block Trump’s tariffs on Canada), earnings durability and capital expenditure plans (especially on AI). The indexes pulled back to where they started and then flatlined for the rest of the day.

European stocks reached new all-time highs overnight on Thursday. Before US markets got under way, we got results from Cisco which showed thin margins and included a downbeat outlook and some pretty dire numbers from Coinbase and both stocks were heavily punished, but McDonalds impressed with its report. The number of existing home sales plummeted.

The indexes got off to another sluggish start before collapsing in the afternoon to close considerably lower on growing fears of AI disruption of industries like real estate, law, media, travel, logistics and financial services as well as something of a reassessment of the previous day’s jobs data. Meanwhile, gold, silver and crypto began to crap out again.

Shutdown-distorted January CPI inflation data was finally released on Friday morning and came in pretty much as expected with the annualized rate easing to 2.4%, mostly driven by a fall in gas prices and a stabilization in shelter costs but tariff-impacted prices continue to increase at an alarming pace.

Nevertheless, a sense of having dodged an inflation bullet pushed stocks up early on before the indexes fizzled out to finish flat for the day but down for the week ahead of another long weekend. Bonds had their best week since October as two-year and ten-year interest rates tumbled (see INTEREST RATES below).

Some things I’m thinking about ..

* Traders are no longer mindlessly taking the AI story at face value and are starting to respond by hiding out in old school names from sectors likely to be less penetrated by AI, such as Consumer Defensive, Industrials and Materials.

* AI was supposed to be a slam dunk trade. However, it is now becoming a potential challenge for investors, not so much in terms of the firms building it out, but to the stocks of some major companies whose underlying business models are threatened by it.

* Developing AI skepticism (described by one analyst as a gradual change from “AI-phoria to AI-phobia”) is also impacting the relative global performance of the tech-dependent overall US stock market (as represented by the S&P 500) which currently sits in a rather sad 69th position in this year’s league table of 92 stock indexes from around the world (South Korea is top of the pile).

* Delinquency rates on loans ranging from mortgages to credit cards rose to their highest level since 2017, now standing at 4.8% of all outstanding US household debt. The increase was mainly driven by rising defaults in mortgage payments among low-income and younger borrowers as well as the resumption of reporting on student loan repayments.

I was recently interviewed by Vetta-Fi who host the annual Exchange ETF conference in Las Vegas about my practice. You can read the interview here.

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ARTICLE OF THE WEEK ..

“When you admit that you don’t know the future, it’s a lot easier to deal with it when it doesn’t go as planned.”

Ritholtz’s Nick Maggiulli on why the consensus can often be wrong and how to stay onside when this happens.

.. AND I QUOTE ..

“You just have to be prepared to be wrong and understand that your ego had better not depend on being proven right.”

Peter Bernstein, financial historian, economist and educator

LAST WEEK BY THE NUMBERS:

Last week’s market color courtesy of finviz.com

Last week’s best performing US sector: Utilities (two biggest holdings: NextEra Energy, Southern Co.) ⬆︎ 7.3% for the week

Last week’s worst performing US sector: Financials (two biggest holdings: Berkshire Hathaway, JPMorgan Chase) ⬇︎ 4.8% for the week

* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price fell 1.3% last week, is flat so far this year and ended the week 2.3% below its all-time record closing high (01/27/2026).

* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. Its price fell 0.8% last week, is up 6.8% so far this year and ended the week 3.2% below its all-time record closing high (01/22/2026).

* VXUS, a Global Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. Its price rose 1.7% last week, is up 9.2% so far this year and ended the week 1.0% below its all-time record closing high (02/11/2026).

INTEREST RATES:

* FED FUNDS RATE * ⬌ 3.625% (unchanged from a week ago)

* PRIME RATE ** ⬌ 6.75% (unchanged from a week ago)

* 3 MONTH TREASURY ⬌ 3.68% (3.68% a week ago)

* 2 YEAR TREASURY ⬇︎ 3.40% (3.50% a week ago)

* 5 YEAR TREASURY ⬇︎ 3.61% (3.76% a week ago)

* 10 YEAR TREASURY *** ⬇︎ 4.04% (4.22% a week ago)

* 20 YEAR TREASURY ⬇︎ 4.64% (4.80% a week ago)

* 30 YEAR TREASURY ⬇︎ 4.69% (4.85% a week ago)

Data courtesy of the Federal Reserve and the Department of the Treasury as of the m...