Welcome to this week's market intelligence briefing. As we navigate the early weeks of 2026, we find ourselves at a fascinating crossroads. The market finished last week virtually unchanged, yet beneath that calm surface, powerful forces are pulling in opposite directions.

On one side, corporate fundamentals continue to impress. Earnings season is delivering results that exceed even optimistic expectations. On the other, we're seeing unusual technical signals that have historically preceded major market moves. Add to this mix a cryptocurrency market that lost nearly $1 trillion in value during the week and ongoing tensions between the US and Iran, and you have all the ingredients for a compelling market environment.

Here's what makes this week particularly intriguing: While software stocks have been selling off sharply despite strong earnings, energy stocks have been rallying despite declining earnings estimates. This divergence matters. We've seen this pattern before at important inflection points in 2000, 2008, and 2022.

Perhaps most important for your positioning: major technology companies just announced capital expenditure plans that exceeded estimates by more than $115 billion. Amazon alone raised its 2026 guidance to $200 billion. These aren't small adjustments. They represent a fundamental reassessment of how much infrastructure the AI revolution requires. What does this mean for your portfolio? How should you think about the apparent contradiction between weakening software stocks and surging AI infrastructure spending? And critically, are we approaching the peak of AI capital investment, or are we barely getting started?

This week, we'll examine these questions through the lens of market action, earnings results, and positioning for the weeks ahead. Let's dive in.

The S&P 500 closed the week down just 0.11% at 6,932, masking significant intraweek volatility. Markets demonstrated resilience as earnings season continued with impressive results and the cryptocurrency market experienced sharp declines, erasing nearly $1 trillion at the week's lows.

We believe the technical picture remains constructive despite short-term noise. The index experienced an early-week downturn as cryptocurrency sold off and the S&P 500 rejected the 7,000 level on February 3rd. This led to a break below 6,900 support and an immediate gap down below 6,800. However, the daily RSI bounced off approximately 40 support, the bottom Bollinger Band was crossed at 6,823, and a potential double bottom formed around 6,780. The resulting rally back above 6,900 on February 6th confirms our view that the underlying market backdrop remains strong.

Market breadth showed concerning signals with multiple Hindenburg Omens triggered during the week. These technical indicators occur when new highs and new lows on the NYSE both exceed certain thresholds while the index remains above its 50-day moving average. We expect these signals should not be ignored. While Hindenburg Omens can occur during sustained uptrends, as witnessed in 2013 and 2017, they have preceded every major market selloff. Last week marked the third such trigger within six days and the eighth in the last six months. Notably, both the 2000 technology bubble and the 2008 financial crisis began after eight Hindenburg Omens within a six-month period.

We're also seeing an unusual divergence between sectors. The Energy sector has broken through year-long resistance at $46, with every single stock in the Energy SPDR ETF moving higher since last earnings reports. Meanwhile, software stocks have sold off sharply, with 83% down since their last earnings despite 70% having estimates revised higher. This pattern mirrors what we observed before major market transitions in 2000, 2008, and 2022.

These types of intraweek declines, where AI stocks drop 20% or more on little news only to rebound over subsequent sessions, can be capitalized on to acquire high-quality names at a discount. We believe the fundamental backdrop remains strong, and day-to-day noise should be viewed in the broader context of sustained earnings growth and robust corporate investment.

Fourth quarter 2025 earnings season has exceeded expectations across multiple metrics. With 59% of S&P 500 companies having reported, 76% beat EPS expectations while 59% exceeded revenue forecasts. The blended earnings growth rate currently stands at 13.0%, well above the initial expectation of 8.3%. This marks a significant acceleration from earlier quarters as large-cap technology stocks reported their results.

Earnings reactions have been mixed this quarter. Some firms exceeded expectations but dropped sharply on the news, while others saw the opposite reaction. We expect this volatility reflects natural consolidation after the strong rally rather than a concerning fundamental divergence. Looking ahead to the first quarter 2026, guidance has been balanced with 23 companies issuing negative EPS guidance and 28 issuing positive guidance.

Sector performance showed notable divergence. AI and autonomy-related stocks demonstrated exceptional strength, with a significant majority of holdings in related ETFs higher since earnings releases. In stark contrast, consumer-facing sectors struggled significantly, with only 34% of retail ETF holdings up since earnings and restaurant stocks performing even worse at just 14%. This suggests continued bifurcation between technology-driven growth and traditional consumer sectors.

Perhaps the most significant development from earnings season was the dramatic upward revision to capital expenditure guidance from major technology companies. Total 2026 CapEx estimates have been revised higher by approximately $115 billion since companies began reporting, with substantial room for additional upside.

Amazon raised its 2026 CapEx guidance to approximately $200 billion, substantially above the previous $140 billion estimate. Alphabet provided guidance of $175 billion to $185 billion, exceeding prior estimates of $135 billion. Meta indicated CapEx of $115 billion to $135 billion, suggesting potential upside to previous estimates of $115 billion.

We believe these revisions are not merely incremental adjustments but represent a fundamental reassessment of AI infrastructure requirements. Despite this massive and growing capital deployment, executives across major cloud providers indicated they remain capacity-constrained and expect demand to continue exceeding supply through much of 2026.

Recent commentary from Nvidia's CEO suggests the buildout phase will extend at least seven to eight years from the launch of ChatGPT before reaching a sustainable replacement cycle. This timeline pushes the expected peak for servers and hardware beyond 2027, potentially extending to 2030. Analysts now expect 2027 CapEx could reach $869 billion, which would negate the primary bear case that spending will peak within the next 12 months.

Economic data revealed continued signs of labor market weakness. Wednesday's ADP private payrolls report came in weaker than expected, followed by the weakest job opening data since September 2020. US employers announced 108,435 layoffs in January, up 118% from the same period a year ago and 205% from December 2025, marking the highest for any January since 2009.

Companies announced just 5,306 new hires, also the lowest January since data tracking began in 2009. We believe the bond market is not fully pricing in how weak the labor market has become, and expectations for Federal Reserve policy have shifted too far in the hawkish direction given these employment trends.

Ongoing tensions between Iran and the US led to elevated volatility throughout the week. US and Iranian officials met in Oman on Friday, with Iran's Foreign Minister characterizing the mediated discussions as a good beginning focused exclusively on nuclear issues. Negotiators returned to their capitals for consultations with plans to continue talks.

We maintain our view that the US is not preparing to enter a prolonged military conflict with Iran. Weakness in equity markets resulting from these concerns should be viewed as solid buying opportunities. A prolonged military conflict runs counter to two of the administration's top priorities: maintaining the image of a peace-focused presidency and achieving lower oil and gas prices. We believe any military action would be swift rather than sustained.

The technical setup for the S&P 500 appears constructive following last week's volatility. Markets have continued to face an abundance of headlines and headwinds, but buyers have proven resilient. The S&P 500 appears to be forming a double bottom around 6,780, the daily RSI bounced off approximately 40 support, and the bottom Bollinger Band was crossed at 6,823.

We are maintaining a bullish stance with a target of 7,150 and a stop loss at 6,800. Since the peak of third-quarter earnings season in October, the S&P 500 has been trading sideways between these levels. The recent pullback has allowed key technical support levels to hold while momentum indicators reset to healthier levels. We continue to view headline-driven volatility as noise and temporary buying opportunities rather than fundamental threats to the equity bull market.

The market appears to be telling us something important through the combination of Hindenburg Omens, sector rotation into Energy and away from Technology, and persistent buying at support levels. While earnings continue to exceed expectations and estimates are being revised higher, the market often looks six to nine months ahead. We remain biased to the upside while nothing is resolved until this recent trading range is broken in either direction.

Several high-profile companies are scheduled to report earnings this week with significant implications for market direction, particularly companies positioned to benefit from continued AI infrastructure spending.

Cisco Systems reports on Wednesday, February 11th. Recent data indicates broad-based momentum across enterprise networking, with a strong campus-refresh cycle and continued data center spending. We expect potential upside to revenue estimates for the quarter, with strength in campus business likely supporting margin expansion. The company had AI infrastructure orders from hyperscalers totaling $1.3 billion last quarter and indicated expectations for roughly $3 billion in AI infrastructure revenue from hyperscalers in fiscal 2026. Given the upward revisions to hyperscaler spending, we believe there is upside to these numbers. The stock needs to beat not just consensus but also provide positive guidance to generate meaningful upside, with order strength being the critical metric.

Astera Labs reports on Tuesday, February 10th. The company is a direct beneficiary of continued hyperscaler CapEx strength, with an expanding role in AI infrastructure connectivity. Amazon's substantially increased 2026 CapEx guidance particularly benefits Astera Labs given its content in Amazon's infrastructure. The company has additional growth drivers including CXL for AI inference, which could alleviate High Bandwidth Memory supply constraints through 2026 by enabling memory sharing across multiple AI accelerators. We expect the company will provide first-quarter guidance above estimates and potentially raise full-year outlook given sustained capacity constraints reported by major cloud providers.

Key economic data releases this week include December Retail Sales on Monday, January Employment data (rescheduled) on Tuesday, Initial Jobless Claims on Wednesday, and January CPI on Thursday. Given recent weakness in employment indicators and elevated layoff announcements, these reports will be closely watched for signs of continued labor market deterioration. We believe weak employment data would support the case for continued Federal Reserve easing despite recent hawkish commentary from officials.

WTI crude closed the week 3.49% lower at $63.49 per barrel after a volatile week that concluded with talks between the US and Iran in Oman. Ahead of the talks, lack of consensus on the meeting agenda kept investors anxious about geopolitical risk, as Iran wanted to focus on nuclear issues while the US sought to discuss Iran's ballistic missiles and support for armed groups in the region.

Oil prices opened the week with a drop to a low of $61.12 on February 3rd, slightly above our $60.00 target. Iranian state TV reported Friday that talks had ended with negotiators returning to their capitals for consultations. The talks will continue. Meanwhile, the administration continued to emphasize readiness for a deal while also stressing preparedness to take forceful action if necessary.

We continue to believe the administration is seeking a diplomatic resolution. A prolonged military conflict with Iran contradicts two top priorities: maintaining a peace-focused image and obtaining lower oil and gas prices. We expect the current geopolitical risk premium built into oil prices will be unwound as diplomatic progress continues.

From a technical perspective, oil prices saw a rejection of approximately 72 trendline resistance in the daily RSI, which then dropped toward 50. Multiple bounces into near-term downtrend resistance occurred in the $64.50 to $65.50 area, all of which were rejected. The daily top Bollinger Band has begun to flatten at $66.00, while the daily bottom Bollinger Band remains well below current levels at $57.57.

We expect more downward pressure early this week with potential for a break below $61.00. Near-term upside appears capped given the technical setup and fundamental backdrop. Therefore, we remain bearish on WTI crude with a $60.00 target and $70.00 stop loss.

Natural gas prices ended the week 22.50% lower at $3.42 as warmer weather forecasts reduced demand and erased a significant portion of recent gains. After a historically cold January, above normal temperatures are now expected across the Midwest and South through February 20th.

The bearish weather outlook explains Thursday's muted reaction to the massive withdrawal from storage for the week ended January 30th. Natural gas inventories fell by a record 360 billion cubic feet, though this was less than the consensus forecast of 375 billion cubic feet. This flipped the market to 1.1% below the five-year seasonal average, signaling tighter supplies. However, concerns about rising production also pressured prices, with lower-48 US dry gas production rising to 112.6 billion cubic feet per day.

We believe the recent rally was driven only by near-term shifts in weather models and appears unsustainable due to underlying fundamental weakness. Natural gas prices began the week with a massive 25.7% drop on February 2nd, breaking below approximately 43 uptrend support in the daily RSI and falling below both ends of the upward trending channel in price. We think a lower high has already formed, and natural gas prices are positioned for a drop below the recent $3.16 low. Therefore, we maintain a bearish stance on natural gas with a $3.00 target and $3.75 stop loss.

Gold prices closed the week 1.79% higher at $4,980 per ounce as the US Dollar Index remained highly volatile and investors assessed the dynamic situation between the US and Iran. Gold experienced an extremely sharp drop early in the week, falling to near $4,400 per ounce as the dollar strengthened and cryptocurrency liquidations dragged precious metals lower.

The Dollar Index has been in sharp recovery since January 27th, rallying from 95.55 to close last week at 97.68. This rebound was largely expected following the sudden drop in mid-January after administration remarks on the dollar. After such a sharp rebound, we believe a lower high in the dollar will likely form in the coming days, which would shift our fundamental perspective back in favor of gold.

Gold's technical picture has normalized after hitting multi-decade overbought levels. The initial drop on February 2nd reached as low as $4,423, slightly below the bottom end of long-term upward trending channel support at $4,450. This appears to be the next major higher low. The move came with a bounce off approximately 50 support in the daily RSI and a shift higher in the daily bottom Bollinger Band to $4,386.

Since its high just two weeks ago, the daily RSI has retracted approximately 40 points and the bottom Bollinger Band has shifted $260 higher, both healthy technical indications. The longer-term fundamental picture has improved over the last two months. Central bank demand continues at historically elevated levels, geopolitical tensions persist globally, and real interest rates remain supportive despite recent nominal rate increases.

We are currently neutral on gold but likely will shift bullish again in the coming days if the $4,800 channel support level is tested. The swings in the market remain historically large, and we prefer to wait for clearer directional signals before re-entering positions.

Astera Labs represents a compelling opportunity in AI infrastructure connectivity. The company reports fourth quarter 2025 earnings on Tuesday, February 10th after market close. Current expectations call for EPS of $0.57 on revenue of $249.79 million.

The fundamental story centers on Astera Labs' expanding role in AI infrastructure connectivity amid sustained capacity constraints at major cloud providers. Amazon, the primary customer for Astera's smart cable modules, raised its 2026 CapEx guidance to approximately $200 billion, substantially above the previous $140 billion estimate. The company has significant content in Amazon's infrastructure as well as exposure to other major cloud providers.

We believe the combination of substantially increased hyperscaler spending and continued capacity constraints provides upside to the company's first-quarter guidance and potentially full-year outlook.

Multiple executives at major cloud providers indicated during recent earnings that customer demand continues to exceed supply and they expect to remain capacity-constrained through much of 2026. This sustained imbalance between demand and supply creates a favorable backdrop for Astera Labs and similar infrastructure providers.

The company has additional growth drivers on the horizon. UALink should become available in the second half of 2026. More immediately, we expect significant upside from the emergence of CXL (Compute Express Link) for AI inference. CXL is a memory and cache coherency protocol that enables sharing of memory across multiple AI accelerators, allowing smaller High Bandwidth Memory footprints per accelerator.

This matters because memory, particularly HBM, remains in short supply and is expected to be supply-constrained through 2026. CXL provides a potential means to alleviate some of these constraints, which translates to more Astera content per rack as infrastructure is deployed to work around memory limitations.

From a technical perspective, shares have pushed through the $184 level ahead of earnings with help from the broader market rally. This breakout from a multi-month consolidation range suggests positive momentum heading into the report.

Since the company's IPO, it has provided positive guidance each time and gapped higher on the news 57% of the time with an average gap of 4.7%. Given the substantial upward revisions to hyperscaler spending, sustained capacity constraints, and multiple growth drivers coming online, we believe Astera Labs is well-positioned for a positive reaction to earnings.

Consider establishing positions around current levels with a target in the $210-220 range and stops below $175.

We maintain a net long position in the overall stock market, reflecting our constructive outlook for equities in the current environment. We believe the combination of strong corporate earnings, sustained technology sector capital expenditure plans, and eventual Federal Reserve accommodation supports further upside in major indices despite near-term volatility.

Within our equity positions, we hold long positions in Cisco Systems and Astera Labs. These holdings reflect our conviction in the sustainability of AI infrastructure spending and companies best positioned to benefit from this multi-year capital expenditure cycle that now appears likely to extend well beyond initial expectations into 2027 and potentially 2030.

Our thesis for AI infrastructure holdings has been significantly reinforced by recent earnings commentary from major cloud providers. Amazon's increased CapEx guidance to approximately $200 billion for 2026, Alphabet's guidance of $175-185 billion, and Meta's raised outlook to $115-135 billion all point to sustained demand for AI servers, networking equipment, and specialized connectivity components.

This massive and growing capital deployment, now estimated at over $700 billion for 2027, creates a favorable backdrop for our holdings. Total 2026 CapEx estimates have been revised higher by approximately $115 billion since companies began reporting, with substantial room for additional upside as more companies provide updated guidance.

Cisco Systems provides critical networking infrastructure for AI data centers and is seeing strong demand across both enterprise networking and AI-specific applications. Astera Labs supplies essential connectivity components, particularly PCIe retimers and emerging CXL solutions, that pair with the latest generation of accelerators. The combination of these positions provides exposure to the AI infrastructure buildout across networking and connectivity.

We have not made changes to these positions during the past week. Recent volatility in technology stocks, including some pressure on our AI infrastructure holdings, appears healthy after strong gains. We view near-term weakness as potential opportunities to add to positions rather than signals to reduce exposure, provided the fundamental thesis remains intact based on continued CapEx commitments from hyperscale cloud providers.

For the S&P 500, we are maintaining our bullish stance with a target of 7,150 and a stop loss at 6,800. The recent pullback from rejection of 7,000 to support at 6,780 created what we view as a favorable entry point, with key technical support levels holding and momentum indicators resetting to healthier levels. We continue to view geopolitical headlines and cryptocurrency volatility as noise rather than fundamental threats to the equity bull market.

In commodities, we remain bearish on WTI crude oil with a $60.00 target and $70.00 stop loss, and bearish on natural gas with a $3.00 target and $3.75 stop loss. The fundamental backdrop for energy remains challenged by rising supply, administration pressure for lower prices, and shifting demand signals. We are currently neutral on gold following recent volatility but expect to return to a bullish stance if the $4,800 support level is tested.

Overall, our positioning reflects confidence in the continuation of the equity bull market, supported by strong corporate fundamentals, sustained AI infrastructure investment, and constructive technical setup following recent consolidation. We remain focused on the AI infrastructure theme within equities while maintaining tactical positions in commodities to capture what we view as favorable risk-reward opportunities. The recent Hindenburg Omen signals and sector rotation warrant close monitoring, but we believe the underlying strength in earnings and capital investment will ultimately drive markets higher.

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^{This report represents analysis and opinion rather than investment advice or recommendations. All views expressed reflect our current thinking and may change as new information becomes available. Past performance does not guarantee future results.}

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