Global equities experienced a turbulent week as markets digested a sharp rotation out of mega-cap technology stocks and into value and cyclical names. Early weakness stemmed from a multi‑day tech sell‑off, triggered by concerns around escalating AI‑related capital expenditure and intensifying competitive pressures, after Alphabet nearly doubled its 2026 AI budget to $185bn and Amazon outlined plans for a $200bn infrastructure spend. Despite the disruption, buyers returned later in the week, helping limit declines in the US and underpinning a more stable backdrop across Europe.

Anthropic’s release of a new legal AI tool for its Claude Cowork platform triggered a sharp sell‑off in software and data‑centric companies, as investors feared the tool’s ability to automate a number of legal tasks could erode traditional software business models. Major names saw steep single‑day declines, while broader SaaS and professional‑services software stocks also slumped amid concerns that general‑purpose AI agents could replace specialised workflow software.

In the US, there was notable divergence between indices. While the Nasdaq remained under pressure from software and semiconductor volatility, the Dow Jones Industrial Average surged to a historic close above 50,000, driven by a rotation into industrials and financials. Caterpillar and Goldman Sachs were among those posting strong gains as investors embraced large‑cap value stocks. Small caps also benefited meaningfully from the shift, with the Russell 2000 advancing as crowded positioning in mega-cap tech unwound.

European markets proved comparatively stable, with cooling inflation and reduced political tension providing a supportive backdrop. Broad‑based gains were evident, while sector rotation mirrored US trends with defensive and industrial names outperforming against a backdrop of tech‑related volatility. Meanwhile, Asian markets lagged slightly as thinning pre‑holiday liquidity and regional tech weakness weighed on performance.

Oil prices fluctuated throughout the week, with West Texas Intermediate ending slightly higher, supported in part by geopolitical concerns. Gold continued its upward trend, benefiting from risk‑off flows during the tech sell‑off. Natural gas, by contrast, slumped sharply. 

Bond markets traded weaker as core US yields moved higher, with 10‑year Treasuries drifting above 4.2% as credit spreads widened. Investors also remained attentive to evolving macro signals, including geopolitical developments and anticipation surrounding the incoming Federal Reserve leadership transition to Kevin Warsh later in the year.

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SJP Approved: 09/02/2026

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