Good morning investors,
The Dow Jones Industrial Average printed yet another record high on Tuesday, its third consecutive session at all time levels, even as the S&P 500 and Nasdaq Composite retreated on fresh AI disruption fears. This divergence encapsulates the 2026 market perfectly as the old economy keeps winning while investors struggle to price the new one. Today brings the delayed January employment report at 8:30 AM Eastern, the first normal jobs release in quite a while and arguably the most anticipated labor market data point since last summer.
The AI repricing continued Tuesday when fintech platform Altruist unveiled a tax-planning tool that can generate personalized strategies in minutes, sending shares of LPL Financial, Charles Schwab, and Raymond James tumbling more than 7%. Morgan Stanley and JPMorgan fell in sympathy. Taken together with the software carnage from last week, it does appear AI is forcing investors to reprice entire sectors in real time. And while the new tools are genuinely impressive, much of the market response looks knee-jerk and overdone.
Opening Bell
Futures are modestly higher this morning, with S&P 500 ($SPY ( ▲ 0.07% )) futures up 0.12%, Nasdaq 100 ($QQQ ( ▲ 0.21% )) futures gaining 0.16%, and Dow ($DIA ( ▲ 0.12% )) futures advancing 69 points. The cautious optimism comes ahead of the jobs report, which economists expect will show 70,000 nonfarm payrolls created in January with unemployment holding at 4.4%. National Economic Council Director Kevin Hassett was already managing expectations yesterday, telling CNBC that people should expect slightly smaller job numbers while citing a productivity boom and workforce changes as factors.
The earnings calendar is packed today with Cisco, Shopify, McDonald's, Kraft Heinz, T-Mobile, TotalEnergies, and AppLovin among the names reporting. This mix of technology infrastructure, consumer staples, and digital advertising will provide important reads on both the AI buildout and the health of the American consumer following yesterday's flat retail sales print.
The AI Repricing: Winners and Losers Will Emerge
What AI is doing is shifting where value accrues within sectors. Tasks built around routine analysis or documentation, once scarce but now scalable with AI, are rapidly losing pricing power. Meanwhile, businesses anchored in distribution, brand trust, and client relationships appear positioned to retain advantages that technology alone cannot replace.
That distinction explains why the sell offs in software and financial services happened first at the sector level. Facing genuine uncertainty, investors reached for blunt instruments, dumping ETFs and broad baskets rather than attempting stock by stock judgments. Winners and losers will emerge soon enough, but not before the market can differentiate between companies that use AI to improve margins versus those whose margins AI will compress.
Claiming that AI is erasing entire sectors of the stock market feels short sighted. A more accurate view is that AI is accelerating a market dominated by stock pickers. The indiscriminate selling creates opportunities for investors willing to do the work of separating the genuinely vulnerable from the merely sold.
Jobs Report: Setting Expectations
The January employment report arrives with considerable uncertainty baked in. Last week's ADP print of just 22,000 private sector jobs came in at roughly half expectations, and JOLTS data showed job openings at their lowest level since 2020. There seems to be a weaker relationship right now between growth and employment, with some of that driven by economic uncertainty and some potentially reflecting secular AI related effects on the labor market.
A disappointing number would add to negative sentiment following yesterday's flat retail sales data, but I would caution against over interpreting any single print given the noise introduced by the government shutdown and seasonal adjustment challenges. The Fed has made clear through two new voting members this week that they still see the case for holding rates steady, and it will take more than one soft report to change that calculus materially.
Earnings Spotlight: Robinhood and Ford
Robinhood delivered a beat and raise quarter with $0.65 EPS versus $0.62 expected and record revenue of $1.28 billion, yet shares fell 7% in premarket trading. The culprit was a 38% year over year decline in cryptocurrency transaction revenue to $221 million, reflecting a 52% drop in crypto trading volumes on the platform. I view this weakness as temporary, reflecting the broader crypto malaise rather than any structural deterioration in Robinhood's business.
The underlying metrics tell a different story than the headline crypto miss. Gold subscribers hit an all time high of 2.8 million. Funded accounts, Gold cardholders, and retirement assets all reached records, with retirement assets doubling year over year to $26.5 billion. The prediction markets business traded 8.5 billion contracts in Q4 and now accounts for roughly 14% of transaction based revenue. The scheduled mid 2026 launch of Rothera, a prediction market joint venture with Susquehanna, positions Robinhood as more than just a brokerage. At these levels, with the stock down 24% year to date, I believe HOOD recovers back above $100 this year as crypto stabilizes and the diversification story takes hold.
Ford posted its largest quarterly earnings miss in four years, reporting $0.13 adjusted EPS versus $0.19 expected, driven by roughly $900 million in tariff related costs and ongoing impacts from an aluminum supplier fire affecting F-Series production. The key message is that this miss was driven by identifiable, largely temporary factors rather than demand weakness. Record 2025 revenue of $187.3 billion underscores that the core business is holding up. If tariff timing normalizes and supply disruptions ease as expected, Ford's 2026 EBIT guidance of $8-10 billion suggests meaningful operating leverage remains intact even as EV losses continue to weigh on headlines.
Lyft achieved its first full year of GAAP profitability, ending its period of cash burn with $0.48 EPS versus $0.42 expected. The narrative has shifted from survival to profitable scale, though macro headwinds and autonomous vehicle competition mean success this year is not guaranteed.
Crypto Framework: Whales Stepping In
Bitcoin has drawn fresh support from its largest holders, with so called whale wallets accumulating approximately 53,000 coins over the past week, their biggest buying spree since November. Data from Glassnode shows wallets holding more than 1,000 Bitcoin added over $4 billion worth of the token, interrupting months of divestment that have left Bitcoin roughly 40% below its October peak.
Whether this marks a genuine recovery or mere damage control remains to be seen. The return of demand is narrow enough to raise doubts, but historically, whale accumulation during periods of retail capitulation has preceded meaningful rallies. The structural case remains intact beneath the noise.
Financial Planning Note: Trump Accounts for Tax-Free Growth
Trump accounts will be available later this year in July for eligible children, and they present an interesting opportunity for long-term tax planning. The strategy is to open a Trump account and contribute $5,000 annually for 18 years. That $90,000 in contributions could grow to approximately $190,000, which can then be converted to a Roth IRA when the child turns 18. The $100,000 gain becomes taxable at that point, but at very low tax brackets of 0%, 10%, or 12% depending on the child's income. Worst case, you pay a few thousand dollars in taxes to establish $190,000 in a tax-free Roth IRA at age 18. The compounding from there becomes extraordinary, or those funds can be used for a wedding, house down payment, or college after satisfying the five year holding period from conversion. Worth exploring with your advisor if you have children or grandchildren.
Corporate Developments
Cloudflare forecast 2026 sales of $2.79-2.80 billion, above the $2.74 billion consensus, betting on AI technology to drive demand for cloud services. Q4 revenue grew 33.6% to $614.5 million.
Edwards Lifesciences guided 2026 profit above estimates on robust demand for artificial heart valves, with transcatheter aortic valve sales rising 12% to $1.16 billion.
S&P Global forecast 2026 profit below expectations at $19.40-19.65 per share versus the $19.94 consensus, pushing shares to their lowest in over two years as AI disruption concerns spread to financial data providers.
Humana guided annual profit well below estimates at $9 per share versus the $11.92 consensus, citing lower quality ratings for its Medicare Advantage plans.
Diversified Portfolio Update
The diversified portfolio continues winning in 2026. Small cap and international outperformance persists exactly as my 2026 outlook report laid out. While mega cap technology digests its excesses and investors scramble to reprice AI winners and losers, the boring parts of the market keep compounding. The Dow at record highs while the Nasdaq struggles tells you everything you need to know about where leadership resides.
Final Thought
The market is telling us something important through its price action. Record highs in the Dow and strength in equal-weight indices while technology struggles is not a warning sign, it is a rotation signal. The diversified portfolio approach I advocated coming into 2026 continues to deliver, with small caps and international equities outperforming exactly as anticipated.
The AI repricing underway across software and now financial services will create tremendous opportunities for investors willing to distinguish between companies genuinely threatened by disruption and those merely caught in indiscriminate selling. This is becoming a stock picker's market in the truest sense. Sector level bets are giving way to company specific analysis as the market demands proof of defensibility and margin resilience.
Today's jobs report will set the tone for the week, but I would caution against over reacting to any single data point given the noise in recent releases. The bigger picture remains constructive as economic growth continues, corporate earnings are holding up outside of idiosyncratic issues, and the breadth of market participation suggests we are mid-cycle rather than late-cycle. Use volatility to add exposure to the themes that are working, like small caps, international diversification, equal-weight strategies, and AI infrastructure beneficiaries beyond the hyperscalers themselves.
As always, feel free to reach out with questions about positioning for these evolving market dynamics.
Best regards,
Dan Sheehan [email protected]
Subscribe: https://substack.com/@dansheehan3
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.