The domestic market closed mostly lower last week as AI disruption fears, sticky inflation, and tariff uncertainty pressured mega-cap leadership.

The S&P 500 fell 0.4%, the Nasdaq dropped 1%, and the Dow lost 1.3%. While breadth improved at times, big tech struggled. As FactSet reported on Friday, 96% of the S&P 500 companies have reported earnings with 73% of those companies having reported a positive EPS. However, NVIDIA, the largest single member of the S&P 500 at over 7%, closed down nearly 7% for the week despite another strong earnings report that exceeded expectations.  That muted reaction highlighted growing valuation concerns and questions around how long hyperscalers can sustain massive AI spending.

AI disruption headlines weighed heavily on software, financials, and asset managers early in the week, especially after reports warning of white-collar job displacement. Although some dip-buying emerged midweek, sentiment remained fragile.

Inflation added to the pressure. January core PPI came in hotter than expected, reinforcing the Fed’s cautious stance and pushing rate-cut expectations further out.

Treasury yields moved lower for the week, with the intermediate to longer end of the yield curve falling around 10 basis points. This boosted the overall bond market with losses largely isolated to the high yield category of bond indices.

Finally, news broke over the weekend that joint US and Israel strikes killed the leader of Iran along with a number of other Iranian military and governmental leaders. Iran responded with numerous attacks to a number of US and other friendly countries’ bases and consulates in the middle east. This caused oil futures to spike back up to above $70 barrel. This is the highest level Crude has been at since last summer.

Market participants are now wondering what will happen to the price of oil and the knock-on implications as the middle eastern region becomes more unstable.