Things you need to know
- Algo’s taketh away and then giveth back!
- Milestone moment – Long term lessons
- The narrative didn’t change, the algo’s over-reacted.
- Oil flat, Gold up, Bonds Flat, Cryptos still confused.
- Try the Roast Beef
OK – time for a lesson…. Step back for one minute….
Let’s be clear — the trading technology that exists today, the speed at which it happens, coupled with increasingly complex trading vehicles that react with little to no consideration for fundamentals, is responsible for much of the blood on the street one day and then for all the euphoria the next. And that’s my take.
Stocks EXPLODED higher on Friday, ripping to the upside in a classic risk-on move as investors, traders, and algos shrugged off the noise and stepped back in to go shopping. I hope you weren’t someone who panicked on Monday only to find yourself chasing it back on Friday — because if you were, all you really did was create noise and anxiety for yourself. In the end, Friday reminded us of a simple truth: when fear becomes the narrative, opportunity usually isn’t far behind.
So, what actually changed on Friday morning? Nothing dramatic — and that’s exactly the point. Buyers that had pushed valuations to crazy levels finally exhausted themselves, then the Anthropic headline created panic – causing investors to question the prices they were willing to pay…..and the panic started.
Leverage became a problem, traders got nervous, stops were tripped as prices declined, trendlines broke, and shorts piled on. Precious metals got whacked, the dollar ripped higher, crypto melted down, and buyers stepped aside, leaving a vacuum in prices that let fear feed on itself. Just like on the way up, prices on the way down disconnect from fundamentals as the pendulum swings too far to the right and then too far to the left.
And then, once the narrative shifted on Friday morning, the algos did what they always do — they flipped – they just switched positions. Buying accelerated, shorts ran to cover, and the same Momo crowd that drove stocks lower suddenly started driving them higher. With no new bad news to keep the panic alive, investors who had jumped out earlier in the week scrambled to get back in — and just like that, it was another day on Wall Street. Remember, markets don’t need good news to rally — they just need bad news to stop getting worse.
So why did the narrative change? Because investors stopped treating the latest Anthropic release as an existential threat and started treating it for what it really was — another step in the evolution of AI, not the end of earnings, productivity, or profitability. Early in the week, the headlines made it sound like AI was about to destroy jobs, crush margins, and upend entire industries overnight. That fear created the anxiety and fueled four straight days of selling. But by Friday morning, it was clear that nothing fundamental had actually changed. AI adoption is still incremental, monetization is still early, and the biggest players still control the infrastructure, the data, and the capital needed to win. In other words, the story hasn’t changed — only the emotion did — and that hysteria created opportunity for investors who didn’t panic. Period, the end. (you can go back and re-read Friday’s note).
The Dow surged by 1206 pts or 2.5% to push up and thru 50,000 – ending the day at 50,115! So, how do you describe that move? From a mathematical standpoint, the Dow moving from the 49,000s to 50,000 is simply a ‘big’ place-value rollover — not a change in fundamentals or magnitude, so while it is mathematically incremental it is psychologically meaningful. And for me- it has been an amazing ride – I have witnessed the Dow go from 792 on August 17th, 1983 (I was 22) to 50,115 on February 6th, 2026! (I am 65) Amazing! That’s a 6200% move – a reminder of what long term compounding and staying invested looks like for all of you new investors.
The S&P added 133 pts or 2%, the Nasdaq rose 490 pts or 2.2%, the Russell surged by 92 pts or 3.6%, the Transports added 347 pts or 1.8%, the Equal Weight S&P added 150 pts or 1.9% while the Mag 7 rose by 145 pts or 0.5%.
Of the 11 S&P sectors – Tech stole the show up 4.1% (but it still remains negative ytd – 2%), Industrials +2.8%, Basic Materials +2%, Energy +2%, Real Estate, Healthcare and Financials +1.8%, Consumer Staples + 1.2%, Utilities +0.6%, Consumer Discretionary + 0.4% while Communications lost 0.4%.
I don’t’ need to tell you that the contra trades got smoked – the SH – 1.9%,
PSQ – 2%, the DOG – 2.4%, the SPXS lost 5.7% while the VIXY gave up 6%.
Bonds did nothing on Friday – the TLT and TLH up less than 0.1%. Yields held steady – the 10 yr is yielding 4.22% while the 30 yr is yielding 4.87%.
Bitcoin is trading at $68,500, Ethereum at $2,020 and Solana is trading at $83.
Oil – continues to trade in the $61/$66 trading range. This morning it is flat at $63.60. Talks with Iran over the weekend were apparently better than expected and so the anxiety that we saw last week in oil – should settle down.
Gold and silver are trading higher after last week’s debacle…. This morning…. Gold is up $30 at $4,995 and remains in the $4550/$5050 trading range. Silver is up $2 at $78.90 and remains in a larger trading range…. $63/$90.
The dollar is down 22 cts this morning at $97.40. Key trendline resistance remains at $98.50 while support appears to be $96. A pull back in the dollar will send precious metals higher.
There is NO eco data today – but later on in the week we will get Retail Sales, Mortgage apps and the January NFP number on Friday – which is expected to show we created 70k new jobs. Wages holding steady at +0.3% m/m and +3.7% y/y. Unemployment to remain at 4.4%.
Earnings season continues….. On deck are Apollo Global Management, Becton, Dickinson, ON Semiconductor, Dynatrace and Cleveland-Cliffs. It’s not a Mag-7 day, but these reports touch financials, semi’s, enterprise software, healthcare, and cyclicals — Sectors of the economy that will confirm that fundamentals are holding up beneath all the recent market noise.
European markets are mixed as earnings season marches on. Italy the best performer – up 1%.
U.S. futures are lower…..and yes, that makes perfect sense. Dow -40, S&P -17, Nasdaq -114, while the Russell is down 7.
The S&P closed at 6,932 – up 134 pts. So, the intermediate trendline at 6,800 held – as I suspected it would. We are now back in the 6,800/7,000 trading range.
If last week taught you anything – it was not to panic – which doesn’t mean we won’t get another drawdown in the market this year…we most likely will, but unless the narrative completely changes, any drawdown should be used as an opportunity for the long-term investor.
Call me at 561-931-0190. Let’s talk about whether the risk in your portfolio actually matches your tolerance — because this works both ways. You may be taking too much risk… or not enough to reach your goals.
Take good care,
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
Roast Beef and Potatoes
This is one of those Sunday dishes that you crave…. A delicious roast beef with potatoes and cherry tomatoes and a large mixed green salad.
For this you need: a 3 lb. Beef Top Sirloin Roast, baby potatoes, cherry tomatoes, olive oil, s&p, garlic, fresh rosemary, thyme and oregano.
Preheat your oven to 400 degrees.
Take the beef out of the fridge and let it come up to room temperature.
In a bowl – mix, the olive oil, minced garlic, rosemary, thyme, oregano and s&p – to form a paste.
Pat the roast with paper towels to dry it off and then massage half of the paste into the beef. Make sure to rub it all around.
Place it in the center of a large roasting pan.
Now – toss the sliced potatoes and the cherry tomatoes with the remaining herb paste and then place all around the beef.
Place it in the oven and roast for 15 mins at 400 degrees to sear the outside. Then turn heat to 350 degrees and roast for another 35 – 45 mins. You need a meat thermometer – 135 degrees – med rare, 145 degrees – more medium, higher than that and you got shoe leather.
When done – remove the beef from the over and tent it with foil and let it rest for 10 mins.
Slice and serve with the potatoes and tomatoes. A large mixed salad complements this as well. You can serve this with a nice hearty – Brunello di Montalcino.
Buon Appetito.