Weekly Recap - When the Mighty Fall, the Quiet Rise

The week of February 9–13 felt like watching a billionaire step on a rake. In slow motion. On a livestream.

Markets opened on Monday with hope. By Thursday, hope was in a dumpster behind a Cisco earnings call. Friday tried to play hero with cooler inflation data. Nobody bought it.

The S&P 500 shed 1.4%. Nasdaq dropped 2.1%. Dow fell 1.2%.

But those numbers are a lie, the polite kind.

Here's the truth: mega-cap tech got dragged behind the barn and beaten with its own earnings reports. Meanwhile, defensive sectors and equal-weighted indexes had themselves a quiet little coronation.

You could've made money this week. Or lost it. Depended entirely on whether you owned the seven stocks CNBC won't shut up about or literally anything else.

Sound familiar?

Beneath the surface of "modest index losses," the market was screaming.

The S&P 500 Equal Weighted Index gained 1.0%. The cap-weighted version lost 1.4%. That's not divergence. That's a mutiny.

Here's the short list:

Even the small fry held up. Russell 2000 dropped just 0.9%. S&P Mid Cap 400 off 0.7%. Your boring uncle's portfolio outperformed your Robinhood account this week.

Think about that.

Investor psychology did a full 180 from "growth at any price" to "prove you're not getting replaced by a chatbot." Companies that couldn't answer? Sold without mercy.

The bond market smelled blood. The 10-year Treasury yield fell 15 basis points to 4.06%. Investors didn't walk to safety; they sprinted.

Monday started with bargain hunters doing what bargain hunters do, convincing themselves the fire sale was over.

Oracle jumped nearly 10%. AppLovin surged 13%. Microsoft, Nvidia, and Broadcom all posted gains. The IT sector led with a 1.6% advance.

"Maybe the worst is over," said people who've clearly never watched a horror movie.

Spoiler: it wasn't.

Because lurking behind every rally was a question nobody could answer: if AI can replace entire software categories, what exactly are we paying for here?

December retail sales came in flat. Consensus expected 0.4% growth. The report, delayed a month by the 43-day government shutdown, landed with a thud.

Translation: consumers are tired. Holiday shopping was supposed to be the bright spot. It wasn't.

The Employment Cost Index also came in soft at 0.7% for Q4, versus the 0.8% expected. Slowest wage growth since Q3 2020.

Walmart and Costco, the "bulletproof" plays, finally dipped as the market started pricing in spending slowdowns. Alphabet and Meta dragged communication services down 0.8%. Western Digital and SanDisk got crushed, down 8.2% and 7.2%, on concerns about memory storage.

Nobody panicked yet. But the smart money was already moving.

The defensive rotation had begun. Quietly. Like it always does.

January payrolls: 130,000. Consensus: 55,000–70,000.

More than double. Stocks opened higher. Growth is great, right?

Wrong.

Here's the kicker: a strong jobs report means the Fed has zero reason to cut rates. June cut probability dropped from 75% to 60%. March cuts? 8%. Basically a rounding error.

But wait, it gets worse.

Full-year 2025 job gains got revised down by 898,000. Final tally: just 181,000 total for the year average monthly gains of 15,000. That's the slowest pace outside a recession since 2003. So we had a strong January print sitting atop a foundation of wet cardboard.

Which number do you believe? Trick question. Nobody knows.

Amazon and Alphabet continued their post-earnings slides. Microsoft fell 2.2%. Memory chips rebounded SanDisk up 10.7%, Micron up 9.9% because this market makes perfect sense. Energy surged 2.6% on U.S.-Iran tensions.

Clarity? Never heard of her.

This is where things got ugly.

AppLovin Monday's hero delivered a beat-and-raise earnings report. Stock cratered 19.7%. Worst S&P 500 performer of the day.

Why? Investors decided its AI moat was imaginary.

Let that sink in. The company beat expectations, raised guidance, and lost a fifth of its value because traders got spooked by a vibes check.

Welcome to 2026.

Then Cisco warned that rising memory costs would crush margins. Down 12.3%. Dell followed down 9.1%. Apple down 5.0%.

This wasn't a tech weakness anymore. It was contagion.

And then it spread further:

Why? A company called Algorhythm Holdings announced 4x productivity gains through AI automation. Logistics investors extrapolated that across the entire industry and ran for the exits.

One press release. Two stocks annihilated. Same story across industries.

Energy reversed course, down 2.2% after Trump suggested Iran negotiations would wrap up within a month. Crude dropped 2.7% to $62.88. Robinhood continued its post-earnings collapse, down another 8.8%.

The only survivors?

Walmart climbed 3.8%. Turns out, when the machines threaten everyone's jobs, people still need to eat. Comforting.

January CPI came in cooler than expected, 0.2% month-over-month versus 0.3% consensus. Year-over-year: 2.4%, down from 2.7%. Core CPI matched at 0.3%, with the year-over-year rate easing to 2.5%. The release was delayed from its original Wednesday schedule by the government shutdown.

Bonds loved it. 10-year yield dropped to 4.06%. The 2-year hit 3.41% lowest since September 2022.

Stocks opened higher. Then did what stocks do in 2026: gave it all back.

S&P 500 finished up 0.1%. Nasdaq slipped 0.2%. Dow: +0.1%.

Zero conviction. Maximum confusion.

Software caught a break; the iShares Software ETF climbed 2.2%. Applied Materials surged 8.1%. But the mega-cap anchor kept dragging: Nvidia fell 2.2%, Apple dropped 2.3%, and Amazon extended its losing streak to six days.

Meanwhile:

The message was clear. Breadth is winning. Mega-caps are losing. And nobody knows if this is a rotation or a revolution.

Prediction markets are hedging everything. Which tells you all you need to know about confidence levels right now.

February CPI (due March 11), the crowd is split:

Translation: traders learned from January's cooler print but aren't ready to bet the trend holds.

Recession odds, world GDP growth, and AI disruption trajectories are all attracting heavy volume. The theme isn't any single prediction. It's that nobody has conviction in any narrative.

Volatility isn't the risk. It's the baseline.

Gold hit $5,048 per ounce by February 10. That's 74% year-over-year.

Seventy-four percent. For a rock.

Here's what's interesting: gold climbed even as inflation cooled. That's not an inflation hedge play. That's a chaos hedge.

Mega-cap tech cracking. AI disruption metastasizing. Rate-cut hopes evaporating. Gold doesn't need earnings beats. Doesn't need a software moat. Doesn't care if your chatbot can automate logistics.

It just sits there. Being gold. Above $5,000.

And right now, that's enough.

Real estate climbed 3.9% for the week. Friday added another 1.5%.

The 10-year yield dropped 15 basis points to 4.06%. The 2-year hit 3.41% lowest since September 2022. Mortgage rates are hovering near three-year lows. Builders are dangling discounts.

Sounds great, right?

Here's the cold water: January existing home sales came in at 3.91 million, versus a consensus of 4.21 million. Supply constraints are still pushing prices higher. Affordability gains from lower rates? Getting eaten alive.

The House passed a bipartisan bill to reduce regulations and increase housing supply. Nice headline. Actually building houses? That takes years, not press releases.

For now, real estate is benefiting more from defensive rotation out of tech than from actual housing fundamentals. But if rates keep falling, that calculus changes fast.

Retail investors are oscillating between panic and defiance. It's not pretty.

Software holders are getting steamrolled. One Jefferies trader called the sector's sentiment the worst they've seen in their entire career. Software is down 23% year-to-date. That's not a correction. That's a reckoning.

Meanwhile, institutional players are executing a textbook defensive rotation of utilities, real estate, and consumer staples. Sectors that don't care if AI can write code.

The divide is stark. Retail is still clinging to mega-cap names because that's what worked for the past 2 years. Institutions are hedging against a world where AI disruption is no longer theoretical.

Guess which group has risk management departments.

This week's market vintage was a split bottle.

First half: oxidized Cabernet that should've been poured out Monday. Notes of regret, leather, and "why did I hold this through earnings?" The end of existential dread.

Second half: surprisingly drinkable Pinot Grigio, served Friday after the CPI print lowered the temperature. Hints of relief. Undertones of defensive rotation. Lingering aftertaste of "wait, are utilities really up 7% this week?"

Pair it with a side of Treasury bonds at multi-year yield lows.

A meal that leaves you full but unsure if you enjoyed it. Kind of like this entire market. Works every time. Probably.

Last week stripped the varnish off mega-cap invincibility.

AI disruption fears went from boardroom hypothetical to portfolio reality. Logistics stocks got vaporized by a single press release. AppLovin beat earnings and lost 20%. Cisco warned about margins and took Dell and Apple with it.

The jobs report was strong, even with weak revisions. Inflation cooled, and nobody cared. Rate-cut hopes? Gone.

What's left is a bifurcated market. Mega-caps struggling to finda footing. Equal-weighted indexes and defensive sectors are quietly winning. Utilities up 7% in a week, like it's normal.

Whether this rotation sticks depends on earnings, inflation, and whether investors decide AI creates jobs or eliminates them.

For now, the only certainty is uncertainty.

And utilities, apparently.