Overview
The market did not drift lower today, it got pulled. The broad tape sold off hard into the close, and the leadership was unmistakable: the tech complex took a hit, the banks didn’t offer much of a cushion, and the old defensive corners quietly wound up doing the most to keep the floor from falling out.
The headline move was in the index ETFs. SPY closed at 681.29, down from 691.96 the prior close. QQQ finished at 600.56 versus 613.11, a sharper drop that fit the day’s narrative: when the market gets nervous about the cost side of the AI buildout, it starts with the supply chain and works backward into the megacaps. DIA ended at 494.64 (prior 501.33), and IWM at 259.56 (prior 264.95), confirming that this was not just a “tech problem.”
Under the hood, the market looked like it was repricing two things at once: what AI spending actually costs, and how much margin the hardware stack can defend when memory prices squeeze. Cisco’s guidance landed like a stone, and it ricocheted through the broader hardware narrative that has been simmering across earnings season.
Macro backdrop
Rates were not the accelerant today, they were the counterweight. The latest Treasury curve snapshot (Feb. 10) still shows a clear inversion at the front end, with the 2-year at 3.45% below the 10-year at 4.16%, and the long bond at 4.78%. That shape matters in weeks like this because it sets the market’s default posture: skeptical on growth, demanding on valuation, and quick to punish anything that hints at a margin squeeze.
Inflation expectations are not flashing a new alarm, but they are not disappearing either. January’s market-based 5-year expectation is 2.39% and the market 10-year is 2.31%, while the 5-to-10 forward is 2.22%. Those are numbers the market can live with. The problem is more practical and more immediate: when earnings season reveals real-world input cost pressure, investors stop treating “disinflation” as a smooth glide path and start asking who eats the costs.
On realized inflation, the latest CPI readings available are for December, with CPI at 326.03 and core CPI at 331.86 (index values). The key takeaway is not the level, it’s the environment: inflation is still a live variable, and it keeps feeding into cost narratives, deficit narratives, and ultimately term premium. That backdrop helps explain why today’s risk-off move flowed into Treasurys rather than out of them.
Equities
The index ETF closes put a clean frame around the day. QQQ did the most damage, closing at 600.56 versus 613.11. SPY closed at 681.29 versus 691.96. The Dow proxy DIA held up relatively better, but still fell to 494.64 from 501.33. Small caps did not provide shelter, with IWM at 259.56 from 264.95.
The individual megacap prints reinforce that this was a tech-led de-risking, not a gentle rotation. AAPL finished at 261.59, down from 275.50, after trading as high as 275.72 and as low as 260.18 on volume of 72,547,503. NVDA closed at 186.91 (prior 190.05) after an intraday range from 193.60 to 186.51 with heavy volume of 179,493,715. MSFT ended at 401.88 (prior 404.37), and META slipped to 649.715 (prior 668.69). AMZN closed at 199.54 (prior 204.08).
What stands out is the lack of a clean “hideout.” Yes, some parts of health care and staples were up on the day in the large single names, but the top-down impulse was still risk reduction. GOOGL was comparatively resilient at 309.09 (prior 310.96), but even that came with an intraday low of 307.39, a reminder that dip-buying was selective, not broad.
Sectors
Today’s sector tape read like a market looking for sturdier footing. Tech was the obvious pressure point, and the sector ETF confirmed it. XLK closed at 139.18 versus 142.97. That’s the market repricing the same fear that echoed through the headlines: hardware costs, memory inflation, and what that does to margins.
Financials did not do the market any favors. XLF ended at 51.685 (prior 52.74). In single names, JPM closed at 302.55 (prior 310.82), BAC at 52.505 (prior 53.85), and GS at 904.44 (prior 944.59). That combination matters because banks are often treated as a reality check on growth, credit, and the path of policy. Today they were part of the drawdown, not a stabilizer.
Consumer discretionary softened, with XLY at 116.13 versus 117.76. Some of the day’s newsflow carried an “earnings reality” vibe, including Lululemon’s product-issue headline and the broader consumer discussion in the background. In single names, discretionary bellwethers were mixed to weak, including TSLA at 416.85 (prior 428.27) and HD at 390.125 (prior 390.68).
Defensives did the quiet work. XLP rose to 89.235 from 88.40, and XLU climbed to 45.265 from 44.59. This is what late-cycle price action looks like when the tape gets jumpy: the market doesn’t “call a recession,” it simply starts paying up for earnings that feel less fragile. That shift was visible even as the broad index sold off.
Energy was a surprise laggard on the day, with XLE closing at 53.965 (prior 54.98). That came alongside a decline in oil exposure via USO to 76.35 from 78.89. Yet some of the broader energy narrative remains in the headlines, including geopolitical risk and the year-to-date sector leadership discussion. In the big integrated names today, the prints were red: XOM finished at 149.92 (prior 155.56) and CVX at 182.37 (prior 185.82).
Industrials slipped but did not break, with XLI at 172.755 (prior 174.84). The defensive-tilted industrial and aerospace names were firmer in a few spots. LMT rose to 637.475 (prior 628.70), RTX to 201.14 (prior 196.51), and NOC to 695.25 (prior 678.83). Meanwhile, cyclicals tied to construction and equipment were hit, with CAT down to 758.60 from 775.00.
Health care was steady at the sector level, with XLV essentially flat to slightly lower at 156.02 from 156.25. Underneath, it was a stock picker’s day. JNJ gained to 244.58 from 240.86, LLY rose to 1038.13 from 1015.21, and UNH moved up to 284.66 from 278.91, while PFE and MRK were little changed.
Bonds
While equities were taking punches, Treasurys leaned the other way. Long duration caught a bid, with TLT rising to 89.22 from 88.06. Intermediate duration also firmed, with IEF up to 96.84 from 96.24. Even the short end was slightly higher, with SHY at 82.945 versus 82.85.
This kind of bond action alongside an equity selloff is the market choosing “risk-off” over “rates up.” It also fits the deficit and fiscal chatter in the newsflow. The CBO-related deficit story and the broader conversation about bond investor sensitivity to large deficits is not new, but on a day when stocks slide, investors still treated Treasurys as ballast.
Commodities
Commodities sent a mixed, slightly confusing message. The biggest standout was precious metals, but not in the way the headlines might lead you to expect. GLD fell sharply to 451.56 from 467.63, and SLV dropped to 67.67 from 76.56. That’s not classic panic hedging. It reads more like de-leveraging or profit-taking, especially against the backdrop of a strong bid in Treasurys.
Energy, meanwhile, cooled. USO slid to 76.35 from 78.89, while natural gas exposure via UNG edged up to 12.42 from 12.32. Broad commodities via DBC eased to 23.805 from 24.37.
Stepping back, the commodity complex did not validate an “inflation re-acceleration” story today. If anything, it looked like the market was reducing exposure across multiple risk buckets, with the exception of Treasurys.
FX & crypto
In FX, the latest EURUSD mark was 1.186632. Intraday high, low, and open were all shown at 1.187698 in the latest read, so directional context is limited beyond the current mark.
Crypto, however, did not hide. Bitcoin’s mark was 65,405.59, down from its open of 66,973.71, with an intraday high of 68,387.51 and low of 65,068.85. Ether’s mark was 1,915.07, down from an open of 1,964.39, with a high of 2,000.73 and a low of 1,895.32. That price action fits the day’s broader tone: less appetite for high-beta exposure when the equity tape is shaky.
Notable headlines
Tech had the microphone, and Cisco handed it to the bears. CNBC reported Cisco stock has worst day since 2022 as memory prices pressure margins, noting shares plunged 12% after lukewarm guidance as memory prices weigh on margins. MarketWatch echoed the theme with Why Cisco’s stock is falling hard and taking the tech sector with it, framing renewed fears about high memory prices. The market treated that as a sector-wide tax, not a company-specific bruise.
There were also clear examples of the market’s new obsession, “AI disruption” spilling into unexpected industries. MarketWatch ran This trucking company is AI’s latest casualty, as the stock heads for a record selloff, describing steep declines in C.H. Robinson as investors focused disruption fears onto logistics. It is not the first time “disruption” has been used as a blunt instrument, but today’s tape suggests investors were ready to swing it.
On the consumer side, MarketWatch’s More ‘see-through’ issues surface for Lululemon, and the stock is taking a hit was a reminder that in a jittery market, operational mishaps are not “one-offs,” they become catalysts. In the same spirit, MarketWatch’s QuantumScape’s stock is falling story highlighted how expensive execution risk can look when the market’s discount rate is still not cheap.
In staples and steadier demand pockets, the headlines were brighter. CNBC reported FedEx says 'exceptional' holiday season will drive expected third-quarter earnings beat, pointing to stronger expected earnings tied to peak season performance. That kind of headline tends to land better when markets are questioning growth durability.
Finally, the fiscal drumbeat stayed audible. MarketWatch’s What’s at stake for bond investors if the U.S. deficit soars to $3.1 trillion over the next decade kept attention on deficits and the bond market’s sensitivity, even on a day when Treasurys rallied anyway.
Risks
- Cost shock risk in the AI supply chain. Cisco’s margin commentary and the memory price theme can spread quickly through hardware and capex expectations.
- Concentration risk in the major averages. The selloff in large tech names like AAPL, NVDA, and AMZN tends to drag index performance with it.
- Financials as a downside amplifier. Weakness in XLF and large banks reduces the market’s usual “value ballast.”
- Cross-asset de-leveraging. The sharp declines in GLD and SLV alongside equity weakness hints that some players were raising cash, not just rotating.
- Crypto beta resurfacing. Lower prints in BTC and ETH alongside equity weakness can tighten risk conditions if volatility persists.
- Fiscal narrative whiplash. Deficit headlines can re-price term premium quickly, even if today Treasurys benefited from flight-to-quality.
What to watch next
- Tech tape follow-through. Whether XLK stabilizes after today’s drop, or whether margin worries keep spreading.
- Megacap damage control. Watch whether the heaviest-weight names, including AAPL and NVDA, can hold their intraday lows from today’s ranges.
- Defensive leadership. Continued relative strength in XLP and XLU would confirm a cautious market posture.
- Bond bid durability. TLT and IEF strength alongside equity weakness is supportive, but it can flip if deficit and inflation narratives reassert.
- Energy’s next move. With XLE and USO down today, watch whether geopolitical headlines reintroduce upside pressure.
- Precious metals behavior. The drop in GLD and SLV is unusual for a risk-off day, and worth monitoring for signs of forced selling.
- Crypto’s correlation. BTC and ETH weakness alongside equities can be a signal that speculative liquidity is thinning.
- Holiday schedule. Presidents Day trading hours and operational timing matter for liquidity, as highlighted in the newsflow.