Index performance and cross-asset backdrop
The major U.S. benchmarks opened soft but not broken. The Dow Jones Industrial Average (DJIA) sat around the 49,000+ zone, modestly green after a prior 500-point surge earlier in the week. The S&P 500 (SPX) hovered just below fresh highs near 6,900–6,920, down only a few points, while the Nasdaq Composite (COMP) underperformed with losses of roughly 0.5%–0.7% as large tech names pulled back together. Small caps on the Russell 2000 (RUT) slid around 0.3%, confirming that breadth leaned negative even as the Dow stayed resilient. Volatility picked up but stayed contained with the VIX in the mid-teens, consistent with “risk premium creeping back in,” not outright stress.
Macro data, labor and trade reshape the rates picture
The macro batch explained why equities struggled to extend the breakout. Nonfarm productivity for the third quarter rose about 4.9%, a strong number that supports profit margins. At the same time, unit labor costs fell roughly 1.9%, versus expectations for only a small decline. Weekly initial jobless claims came in near 208,000, above the prior 199,000 but still historically low, while continuing claims climbed toward 1.9 million+. On the external balance front, the October trade deficit collapsed to roughly $29.4B, down about 39% month-over-month as exports grew around 2.6% and imports fell about 3.2%. Year-to-date, the deficit is still running roughly 7%–8% above 2024, but the short-term tightening of the gap helped the dollar and nudged yields higher, pressuring duration assets and growth stocks.
Rates, dollar and commodities: higher yield, firmer dollar, mixed risk signals
The 10-year Treasury yield traded around 4.17%–4.18%, up a few basis points, with the 2-year near 3.49%, keeping the curve still tight but not deeply inverted. The U.S. Dollar Index (DXY) pushed toward the 98.8–98.9 band, a modest rise that weighed on metals. WTI crude (CL=F) recovered to the $56.8–$57.2 area, up roughly 1.5%–2% on the session, while Brent (BZ=F) hovered near $60.8 with similar percentage gains after a Venezuela-driven slide the prior day. Precious metals finally exhaled: gold futures (GC) eased to about $4,430–$4,446/oz, down around 0.4%–0.7%, and silver (SI) dropped harder toward $74–$75/oz, down roughly 3.5%–4%. Bitcoin (BTC-USD) slipped from intraday highs near $91,500 to around $89,700, a normal give-back after an aggressive run. From a positioning perspective, the move looks like a mild de-risking out of crowded trades rather than a full macro regime change.
Defense complex: Trump’s $1.5T “Dream Military” resets valuations
The clearest theme of the day came from Washington. President Donald Trump proposed lifting the Pentagon budget to $1.5 trillion for 2027, versus roughly $901 billion approved for 2026. That is not an incremental tweak; it is a structural step-change that forces a repricing of cash-flow expectations across primes, aerospace, and defense technology names. Core contractors ripped higher: Northrop Grumman (NOC) jumped roughly 8%–10%, Lockheed Martin (LMT) rallied around 7%–8%, RTX (RTX) climbed 4%–5%, General Dynamics (GD) gained about 6%–7%, and L3Harris Technologies (LHX) advanced around 6%–7%. Higher-beta names like Kratos Defense (KTOS) surged into double-digit percentage gains. The SPDR S&P Aerospace & Defense ETF (XAR) added roughly 4%–5%, extending a double-digit year-to-date gain in just the first days of 2026. After Wednesday’s hit on dividend/buyback rhetoric, this budget signal clearly outweighs the policy noise. On the data, the defense sector screens as Bullish / Buy on a multi-year view, with the caveat that valuations will now embed political risk premia; any walk-back from the $1.5T figure would trigger sharp reversals.
Sector rotation: energy and industrials offset tech selling
The sector tape showed a classic rotation: S&P 500 Energy (SP500.10) and S&P 500 Industrials (SP500.20) advanced roughly 1%–1.4%, while S&P 500 Information Technology (SP500.45) slid about 1.5%–1.7%. That spread is large enough to pull the Nasdaq Composite (COMP) lower even when the S&P 500 (SPX) is nearly flat and the Dow (DJIA) ekes out gains. Industrials benefited from the same defense bid and from steady global demand expectations, while energy caught a bid from the oil rebound and Venezuela headlines. In contrast, richly valued growth and AI-heavy names faced profit-taking with higher yields and Friday’s jobs/SCOTUS tariff decisions in view. The rotation favors overweight energy and defense/industrials, and neutral to underweight front-loaded large-cap tech in the very near term.
Mega-caps and AI hierarchy: Alphabet tops Apple, Nvidia still king
A key psychological shift: Alphabet (GOOGL) has now overtaken Apple (AAPL) in market capitalization for the first time since 2019. Alphabet closed near $321.98, putting its value around $3.88–$3.89 trillion, while Apple sits closer to $3.84–$3.85 trillion after a string of down days. Nvidia (NVDA) remains the market-cap leader near $4.6 trillion. The ranking says a lot about how investors are allocating within AI: NVDA is being priced as the core compute monopoly, GOOGL as an AI infrastructure and TPU-driven platform that has re-earned investor confidence after its Gemini 3 rollout, while AAPL is being discounted for a slower, less visible AI monetization path. On today’s tape, GOOGL traded fractionally higher, NVDA slightly lower, and AAPL extended weakness. From a stance perspective, GOOGL looks like Buy / Bullish on AI upside and relative valuation, NVDA is Hold / Bullish but crowded, and AAPL is Hold / mildly Bearish near term until the 50-day moving average is reclaimed and an AI monetization strategy is clearer.
Tech drag: Apple, Tesla, Oracle, Strategy and Seagate weigh on Nasdaq
The Nasdaq Composite (COMP) underperformance ties directly to several heavyweight laggards. Apple (AAPL) fell more than 1% in early trade, extending a near-week-long losing streak and sitting below its 50-day moving average, a technical negative. Tesla (TSLA) dropped around 1%, having already fallen in 9 of the last 10 sessions; the stock has slipped back under a $474.07 buy point and broken its own 50-day line, which is an explicit Sell signal for technical traders even if long-term holders remain. Meta Platforms (META) traded down more than 1%, and enterprise-focused Oracle (ORCL) lost more than 2%, adding pressure to the software and cloud complex. Bitcoin-levered Strategy (MSTR) pulled back roughly 2% as BTC-USD retreated from record territory, and Seagate Technology (STX) fell by a similar magnitude, showing how storage and data infrastructure names remain sensitive to any hint of AI-related risk-off. On the other side of the ledger, Costco Wholesale (COST) and Axon Enterprise (AXON) rallied more than 2%, helping cushion the Nasdaq 100. Overall, tech as a group trades as Hold / selectively Bearish short term, with specific Sell triggers on names that have violated key support such as TSLA.
Single-name outperformance: Costco, Axon, Globus Medical and defense ETF XAR
Within the Nasdaq 100, COST and AXON stood out with >2% gains early, reflecting the market’s preference for high-quality retail with strong membership economics and for public-safety tech tied to long-duration municipal and federal spending. In the broader market, Globus Medical (GMED) rallied around 7%–9% after pre-announcing fourth-quarter revenue and 2026 guidance above expectations, pulling medical-device sentiment higher. The XAR defense ETF, as noted, gained around 4%–5%, putting it among the best-performing sector products year-to-date. These names illustrate what is working: cash-generative demand visibility (COST), structural secular growth (AXON, GMED), and policy-supported spend (XAR and its components). On the data, those pockets justify a Buy tilt for COST, AXON, GMED, and the broader defense basket via XAR, assuming investors can tolerate headline risk.
Earnings focus: Applied Digital, Constellation Brands and Alcoa
On the earnings front, Applied Digital (APLD) delivered one of the cleanest fundamental surprises. Fiscal Q2 revenue jumped roughly 250% to about $126.6 million, versus expectations near $110.3 million. Instead of the anticipated adjusted loss of more than $13 million, the company roughly broke even with an adjusted profit around $0.1 million. APLD also disclosed two signed data-center leases with AI hyperscalers in North Dakota and is negotiating with a third, underscoring that AI data-center demand is not confined to the headline mega-caps. The stock added ~6%–10% and has more than tripled over 12 months, so the story is Bullish but high-beta, appropriate for speculative Buy money rather than core capital.
Beverage giant Constellation Brands (STZ) gained around 2.5% in post-earnings trade, signaling that premium alcohol demand and pricing power remain intact despite rate-sensitive consumer stress. That profile supports a Hold / Buy-on-pullbacks stance.
On the downside, Alcoa (AA) was cut to Underweight from Neutral at a major bank despite a price-target increase to $50. The key issue is valuation after a roughly 74% one-year rally; with the stock around the low $60s, the target implies ~20% downside. For a cyclical aluminum name facing tariff uncertainty and macro risk, the risk-reward looks skewed. AA screens as Hold-to-Sell, with upside now heavily dependent on an even more aggressive metals cycle.
Biotech and pharma: Vanda’s jet-lag setback
Vanda Pharmaceuticals (VNDA) saw its shares drop more than 12% in premarket trade after the FDA declined to approve its supplemental NDA for HETLIOZ (tasimelteon) in jet-lag disorder. While the agency acknowledged positive efficacy in controlled trials, it argued that the phase-advance sleep protocols did not sufficiently replicate real-world jet travel conditions, citing factors like cabin pressure, noise and light changes. VNDA said it “respectfully disagrees” and will continue to work with regulators, but the immediate impact is straightforward: the jet-lag indication is off the table for now, trimming the company’s near-term revenue optionality. Given that VNDA shares had gained more than 80% over the last year into this event, today’s reaction is rational. Risk-adjusted, the stock leans Sell / Avoid until there is tangible progress with the FDA or a clearer alternate growth lever.
Energy and Venezuela: oil rebounds, U.S. refiners and Chevron positioned to win
Oil’s rebound ties directly to Venezuela’s political reset and U.S. policy. After the capture and ouster of President Nicolás Maduro, the U.S. signaled that it will control Venezuelan oil sales “indefinitely,” funneling proceeds through American banks while rolling back parts of the sanctions regime. Interim authorities are expected to transfer 30–50 million barrels of crude to the U.S., stoking near-term supply but also setting up medium-term investment and export growth. Refiners Valero Energy (VLO) and Phillips 66 (PSX) rose on the prospect of cheaper heavy crude feedstock and higher utilization. Chevron (CVX), the only U.S. major still operating in Venezuela, suddenly owns a strategic lead in a country with the world’s largest proven reserves but severely damaged infrastructure. WTI near $57 and Brent near $61 show that the market is treating this as a re-routing story, not a collapse in pricing power. Refiners like VLO and PSX look Buy-biased on margin expansion, while CVX stands as a core Hold / Buy, with asymmetric upside if large-scale rehabilitation of Venezuelan output proceeds under U.S. stewardship.
Gold, silver and the $5,000 debate
Even after today’s pullback, gold remains the center of a major macro narrative. With futures still around $4,440/oz and large banks publicly modeling $4,000–$4,800 for 2026, some forecasts are now floating $5,000/oz in the first half of the year under lower real-rate assumptions. At the same time, the metal is reacting negatively to every tick higher in the 10-year yield and every uptick in the DXY, as shown by today’s 0.5% move down in gold and 3%–4% slide in silver. After the vertical rally, the risk is that any upside surprise in inflation or a slower-than-expected Fed easing path could squeeze leveraged longs. Here the stance is Hold / Neutral-to-Bullish: the structural case for gold as a hedge against fiscal overshoot and real-rate compression remains intact, but the short-term entry point is no longer cheap, and volatility will be high around data and Fed communications.
