By Mike Dolan
Feb 4 –
What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
The AI wave clearly doesn’t float all boats. Tuesday’s withering shakeout in the shares of software, data analytics and professional services operations shows how new AI development can cut both ways. Other tech firms also suffered, with Microsoft hit again and AMD down sharply out of hours despite a forecast-beating headline earnings beat.
Against that backdrop, Walmart – an early adopter of AI in its processes – became the first retailer ever to top $1 trillion in market valuation on Tuesday. This caps off a year-long rally which has seen its shares soar nearly 26%, vaulting it into the ranks of the tech heavyweights.
I’ll get into that and more below.
But first, check out my latest column on why Australia’s recent rate hike may be a wakeup call for global central banks
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AI SCATTERS THE TECH HERD
The trigger for the ongoing selloff in global software stocks was actually news from last Friday that AI firm Anthropic had launched a new AI “agent” for automating work tasks. The fact that it took almost two full trading days to land shows how much it blindsided investors, even though recent months have seen markets discriminate much more ruthlessly between winners and losers from AI in the digital and tech space.
Alphabet’s results after Wednesday’s bell will test the mood further. After major Wall Street indexes lost about 1% or so on Tuesday, Nasdaq futures remained in the red early today. Around the world the tech herd was similarly scattered, with hardware and chip firms in Asia continuing to do well but software firms in India also getting caught in the downdraft.
Elsewhere, European pharma giant Novo Nordisk slumped almost 20% after the Wegovy maker warned about this year’s profit outlook amid fierce competition in the weight-loss drugs world.
Back in macro markets, investors are trying to parse signs of an acceleration in economic activity flagged by the sharp jump in ISM’s manufacturing index, brisk business loan growth in the Fed’s quarterly loan officers survey and even the slightly jarring sight of Australia raising interest rates this week.
ISM’s service sector report for last month is due later, with ADP’s private sector jobs report also due. Even though the House of Representatives voted on Tuesday to end this week’s partial government shutdown – at least for another 10 days – it’s too late to ensure a full January employment report this week.
Overseas, service sector surveys were slightly below forecast in Europe, but they picked up steam in Japan and China.
With one eye on tomorrow’s European Central Bank and Bank of England policy meetings, currencies were a bit calmer. But the yen fell again ahead of weekend elections in Japan, and China’s yuan briefly strengthened to its best levels in almost three years as the Lunar New Year holiday nears.
Gold continued its recovery and oil spiked amid a fresh flare-up in U.S.-Iran tensions that saw the U.S. military down an Iranian drone on Tuesday. Bitcoin struggled to stabilize after hitting its lowest level since before the U.S. election in 2024.
Chart of the day
A deep selloff in global software stocks entered a second day on Wednesday as concerns about how AI could impact these companies’ livelihoods mounted. The trigger of the selloff was Anthropic’s new agentic AI tool.
Over the past six months, investors have started to discriminate between potential winners and losers from AI within the tech sector itself. Since OpenAI launched ChatGPT, S&P 500 software and services stocks are now actually in the red – while chips stocks have almost trebled.
Today’s events to watch
* U.S. ISM services PMI for January (10:00 AM EST), S&P Global services PMI for January (9:45 AM EST), ADP private sector jobs for January (8:15 AM EST)
* Fed Governor Lisa Cook speaks, Richmond Fed’s Thomas Barkin speaks
* U.S. corporate earnings: Alphabet, Arm, Eli Lilly, Qualcomm, Uber
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(By Mike Dolan)
