The modest advance came despite continued pressure in software names. The iShares Expanded Tech-Software Sector ETF (IGV) fell more than 2%, taking its year-to-date loss to about 23%. Stocks including ServiceNow, Autodesk, Palo Alto Networks, Salesforce and Oracle declined between 1% and 4%, extending sharp losses this year amid fears that AI tools could disrupt traditional software providers.
However, as selling pressure remains on software stocks, with AI fears strengthening, investors rotated into financials, with shares of Citigroup rising 2.6% and JPMorgan gaining more than 1%.Leah Bennett, chief investment strategist at Concurrent Investment Advisors, told CNBC, “We just need time to see what earnings are going to look like from some of these companies.”
She added, “I think those that aren’t able to compete and don’t really have moats around their business, you’re going to see a deterioration,” noting that the disruption could help markets identify long-term winners.
The session followed two consecutive weekly declines in the S&P 500, with the Dow and S&P 500 losing for four weeks of the last five, as AI-related disruption concerns weighed on sectors ranging from software and real estate to trucking and financial services. The Nasdaq logged five consecutive losing weeks, recording its longest losing streak since 2022.Scott Chronert, US equity strategist at Citigroup, told CNBC, “AI innovation and its disruption are calling into question terminal multiples in various corners of the market,” adding that companies will need to convince investors of their long-term business resilience.
According to Bloomberg, traders are increasingly split between fears that AI will rapidly displace segments of the economy and doubts about whether heavy AI spending will generate near-term returns. Mentions of AI disruption on corporate earnings calls have surged this quarter, Bloomberg reported.
Michael Wilson of Morgan Stanley told Bloomberg that markets could face more near-term volatility due to AI disruption concerns, elevated capital expenditure and crowded trades.
Coming to commodities and crypto, Bitcoin hovered near $67,500, extending its February weakness, while gold slipped below $4,900 an ounce as investors booked profits.
Investors are now looking ahead to the Federal Reserve’s January meeting minutes on Wednesday and the personal consumption expenditure (PCE) inflation report on Friday for further direction on interest rates.
Meanwhile, a Bank of America fund manager survey showed investors are holding their largest overweight position in equities since December 2024, triggering what strategist Michael Hartnett described as a contrarian “sell” signal, according to Bloomberg.
