Financial markets will digest a mix of drivers and the new Lunar New Year in the days ahead, after a relatively quiet past week with stock markets treading water, while bond yields have moved lower despite the stronger US employment report.
Stock investors will eye Thursday’s Walmart earnings after the supermarket giant hit the $1 trillion market cap mark. The retailing behemoth is a bellwether for the US consumer and comes after mixed recent data. US retail sales were unexpectedly flat, potentially setting consumer spending on a slower growth path heading into 2026, but we recently also got a surprisingly strong payrolls report for January which eased some concerns about economic weakening.
Of course, stock indices may appear relatively steady, but that masks a lot of volatility within sectors brought about by the ongoing rotation either out of tech, or more recently within tech and AI-impacted stocks. Last week saw AI disrupt tech itself with the ‘buy the dip’ mentality seemingly exchanged for a ‘sell now, ask questions later’ one.
The new concern is no longer if AI is overhyped, but that its real-world impact may be larger and faster than many thought, and also more economically deflationary than previously anticipated. This is a big question but for now, selectivity is the key as funds indiscriminately sell areas of the market.
Elsewhere, mid-month generally means a UK data dump which includes the all-important wages, jobs, and inflation figures, as well as retail sales. It comes against the background of a hotter-than-expected previous inflation print but a central bank expecting quite a sharp drop in prices pressures in the months ahead. The chance of a March rate cut by the BoE is currently high around 75%+.