Big picture for Wednesday, Feb 4, 2026

• Tech-led pullback creates tactical opportunities: The S&P 500 closed at 6,917.81 on Tuesday, down 0.84%, as investors rotated out of tech leaders. The Dow shed 166.67 points (0.34%) to 49,240.99 after briefly touching a fresh record of 49,653.13 earlier in the session. This marks the first meaningful pullback in February after Monday's strong open.
• Key earnings catalyst ahead: Alphabet (GOOGL) reports Q4 2025 earnings after the market close today, with expectations of $2.64 EPS on $111 billion in revenue. The stock entered the print up ~70% over the past year, trading near $343. The $4 trillion valuation milestone hangs in the balance as investors weigh AI and cloud momentum against stretched multiples.
• Fed on hold, macro backdrop stable: The Federal Reserve maintained rates steady at the January meeting, noting solid economic activity expansion and signs of stabilization in the labor market. The Beige Book showed slightly increased economic activity despite a moderate decline in home sales. No major economic releases today, but Friday's jobs report looms large.

Overnight & index context

• S&P 500 at 6,917: The pullback from Monday's highs near 6,976 leaves the index still up ~16% year-over-year. The tech-heavy Nasdaq Composite declined 1.4% on Tuesday, showing relative weakness versus the broader market—a reversal of recent leadership patterns.
• Rotation dynamics: Tuesday's action saw money moving out of high-multiple tech and AI names into more defensive and value-oriented sectors. This is a healthy development for market breadth if it persists, though it creates near-term pressure on the headline indices.
• Volatility environment: Index volatility remains relatively subdued despite the tech pullback, suggesting this is positioning adjustment rather than systemic de-risking. Single-name volatility in earnings candidates (GOOGL, AMZN later this week) is elevated.

Today's key catalysts

1. Alphabet (GOOGL) Q4 Earnings – After Market Close

The most significant single-stock event of the week arrives this afternoon:

• Expectations: $2.64 EPS on $111 billion in revenue, following last quarter's milestone of first $100 billion quarter.
• Key narratives: AI integration across Search and Cloud, YouTube monetization trends, Waymo progress, and capital allocation updates including the dividend.
• Options positioning: Expect elevated implied volatility and potential for sharp post-earnings moves given the stock's 70% run over the past year.
• Mag 7 ripple effects: As the first of the major tech giants to report this week, Alphabet's results will set the tone for Amazon (Thursday) and broader tech sentiment.

Day-trading angle:

• Pre-earnings: Avoid new directional positions into the print; volatility is expensive and binary outcomes are high.
• Post-earnings: Wait for the initial 15-30 minute price discovery before assessing whether the move aligns with the actual news and guidance quality.
• Sympathy plays: Other mega-cap tech, cloud names (MSFT, AMZN), and AI infrastructure plays may move on Alphabet's commentary.

2. Sector rotation theme continues

Tuesday's rotation out of tech may extend or reverse depending on Alphabet's results and broader sentiment:

• If rotation continues: Watch for strength in financials, industrials, healthcare, and utilities as funds seek lower-multiple exposure.
• If tech bounces back: Look for leadership from semis, AI infrastructure, and the remaining Mag 7 names into Amazon's report.
• Breadth indicators: Monitor NYSE advance-decline line and small-cap performance for clues about underlying market health.

3. Friday jobs report positioning

Traders will begin positioning for the February 6 nonfarm payrolls report:

• Consensus expectations: Look for signs of labor market resilience that could reinforce the Fed's higher-for-longer messaging.
• Rate path implications: Strong data supports the economic soft-landing thesis but could pressure growth multiples; weak data raises recession concerns.
• Volatility bleed: Consider whether to reduce gross exposure ahead of the jobs print if you're short-term oriented.

Sector & theme watch

• AI / Cloud / Big Tech: All eyes on Alphabet's report. The group has been the market's engine; today's results either reignite momentum or confirm the rotation thesis.
• Semiconductors: Trading in sympathy with AI sentiment. Any commentary from Alphabet on AI capex plans could move the group.
• Defensives (Utilities, Staples, Healthcare): Catching rotation flows. Less exciting but offering relative stability if tech volatility persists.
• Financials: Rate-sensitive and starting to benefit from yield curve steepening. Earnings from major banks largely behind us, but regional banks remain active.

Risk management notes

• Earnings volatility is expensive: Don't pay up for options into known events unless you have a strong directional edge. The straddle often prices in moves larger than what actually occurs.
• Respect the rotation: If money is moving out of your tech positions systematically, don't fight the tape. Scale down or rotate with it.
• Event risk stacking: We have Alphabet today, Amazon Thursday, and jobs data Friday. Consider reducing position sizes across the board to account for headline volatility.
• Have a plan for the GOOGL print: Know your intended holding period and stop-loss before the number hits. Post-earnings moves can be violent and unpredictable.

What not to chase

• Alphabet into the close: The risk/reward of new positions ahead of earnings is poor given elevated IV and binary outcomes.
• Chasing yesterday's rotation: If defensives rallied hard Tuesday, wait for pullbacks rather than buying at extended levels.
• Catching falling tech knives: Tuesday's tech weakness may continue; don't average down without a clear technical support level and catalyst.

Trading takeaway

Today's session revolves around Alphabet's earnings report, which will likely set the tone for tech sentiment through week's end. The Tuesday pullback created some breathing room in overheated AI names, but the key question is whether this is a healthy rotation or the start of a deeper correction. For day traders, the cleanest approach is to stay nimble—reduce size into the earnings print, wait for the initial price discovery, then assess whether Alphabet's results and guidance support a continuation of the growth narrative or confirm a shift toward value and defensive positioning. With jobs data Friday, maintaining flexibility and respecting event risk is paramount.

1. Overnight & Pre-Market Narrative

Headline News

Coming into Tuesday, February 3, 2026, the dominant narrative is that the market has absorbed last week’s metals/crypto shock and is leaning back toward risk-on, led by AI and large-cap tech. The S&P 500 via SPY is being supported by strength in mega-cap growth and chipmakers, with financial media highlighting AI-related gains and resilient earnings as the key drivers.

News flow from overnight and early pre-market commentary emphasizes:

• Resilient US equity futures: S&P 500 futures are modestly positive, reflecting follow-through buying after Monday’s gains driven by AI and semiconductor names.
• Rebound in precious metals: After last week’s violent flush, spot gold and silver are bouncing, which helps to stabilize broader risk sentiment and suggests the panic phase of that move may be easing.
• Ongoing focus on AI and tech earnings: Coverage of SPY notes that "AI strength" remains a central theme, with large-cap tech and chipmakers leading performance.

Global Context (Europe/Asia)

Overnight trading in Europe and Asia has been generally constructive to neutral for risk assets:

• Major European indices are modestly higher or flat, helped by improved sentiment after the metals/crypto selloff did not spill into a broader equity rout.
• Asian markets show a similar pattern: some strength in tech and export-sensitive names, with cautious interest around China-related headlines and global growth expectations.
• There are no major new central bank shocks or surprise policy moves hitting the tape this morning; monetary policy focus remains on upcoming US data rather than overnight developments.

Key Stock Movers (large-cap / SPY-relevant)

For a 1–3 DTE SPY options lens, the key movers are heavily weighted large caps, especially in tech and AI-related names:

• AI and chipmakers (semis): Media coverage highlights chipmakers and AI beneficiaries as leaders on up days. Strength here tends to lift SPY, given their weight. Any negative surprise headlines in this group would be a meaningful downside risk for short-dated calls.
• Large-cap tech / "Magnificent Seven" names: Pre-market commentary focuses on ongoing earnings reactions and guidance for cloud, ads, and AI infrastructure. While individual names may gap on earnings or guidance, the overall tone remains constructive.
• Defensive sectors: Utilities and staples are not the main story this morning, but they remain important as potential hiding places if the tone shifts risk-off around data or yields.

2. The 3-Day Risk Horizon (Critical for 1–3 DTE)

For 1–3 day SPY options, the key is the event landmine map rather than a full macro calendar. The next 72 hours contain both ongoing earnings landmines and important economic data that can reset the narrative quickly.

Today (T)

• Ongoing earnings releases: Multiple S&P 500 components are reporting today. The pattern this season has been that even beats can trade down if guidance is cautious or valuations are stretched. Expect single-name gap risk that can bleed into sector ETFs and, by extension, SPY intraday.
• Second-tier US data: Today may feature lower-tier economic releases (e.g., regional surveys, housing or confidence figures) that are unlikely to change the Fed path alone but can tweak intra-day sentiment and yields.

Implication for 0–1 DTE: Earnings headlines are more likely to move specific sectors and the mega caps than the entire index, but in an environment where SPY is near highs, surprise disappointments can trigger fast, shallow pullbacks.

Tomorrow (T+1)

• Higher-impact US data: Over the next 48 hours, markets are bracing for more meaningful releases (jobs, inflation, or Fed-adjacent data). This raises the chance of a macro-driven repricing of yields and risk assets.
• Potentially busy earnings tape: If some mega caps or systemically important sectors report tomorrow, there is overnight gap risk that will be hard to hedge cheaply once the market has closed.

Implication for 1–2 DTE: Avoid blindly holding short-dated options (especially naked calls or puts) through a day where high-impact macro data is due early in the morning. IV can stay elevated into the release and then crush immediately afterward.

Day After (T+2)

• Data and earnings spillover: Even if the bigger data prints are on T+1, their impact on yields, growth expectations, and Fed pricing will echo into T+2 as strategists publish notes and flows adjust.
• Event drift risk: A seemingly quiet T+2 can still see trend continuation or reversals based on how the market digests earlier news, especially in AI/tech and rate-sensitive sectors.

Implication for 2–3 DTE: If you enter trades today that expire in 2–3 days, make sure you’re explicit about which macro or earnings catalysts you are willing to sit through and which you are not.

3. SPY Trading Outlook (Next 1–3 Days)

Market Sentiment (News-Only View)

Bias: Cautiously bullish / constructive

• Why slightly bullish: Recent sessions show the S&P 500 grinding higher, powered by AI and semiconductor strength, with Monday’s gains described as broad and led by growth names. The market has absorbed last week’s metals/crypto dislocation without a cascade in equities, suggesting underlying risk appetite remains intact.
• Why not outright euphoric: The index is rallying from elevated levels with a heavy earnings and data calendar. Positive narratives can flip quickly if a major mega cap disappoints or if upcoming data pushes yields higher.

Options Strategy Implications (1–3 DTE)

Buying vs. Selling Premium

• Premium still has a macro floor: The presence of a meaningful 3-day event horizon (earnings + data) keeps implied volatility from collapsing fully, which can make straight premium selling (e.g., short straddles or strangles) uncomfortable unless you are very selective and hedged.
• For directional punts (calls/puts): If you are buying SPY calls or puts with 1–3 DTE, treat them as tactical trades with defined news catalysts. The environment supports moves both on strong AI/earnings headlines and on negative surprises in data or yields.
• For premium selling: Credit spreads or defined-risk structures are safer than naked short options. Selling far-out-of-the-money spreads around the current range can work if you are explicitly betting that upcoming data will not be a shock.

Trend vs. Chop (News-Driven Read)

• Trend case: Continued AI and mega-cap tech strength, alongside stable or slightly supportive macro data, could keep SPY grinding higher. News headlines leaning "SPY soaring on AI strength" fit a trend-friendly backdrop.
• Chop case: Conflicting earnings messages (some beats sold, some misses bought) plus mixed data could keep SPY in a range with intraday whipsaws. This environment favors short-term premium sellers with tight risk controls.

Key Risk Factors (Next 72 Hours)

• Single biggest risk: A high-impact US data print (jobs or inflation) that sharply moves bond yields and forces a repricing of Fed expectations. A hotter-than-expected inflation or jobs report could quickly shift the narrative toward "higher for longer" and pressure SPY via multiple compression, especially in high-valuation tech.
• Secondary risk: A negative surprise from one of the mega-cap leaders (guidance cut, cautious commentary on AI or cloud demand) that drags the entire complex lower.
• Positioning risk: With SPY near highs and AI themes crowded, any adverse headline can trigger fast downside moves as crowded longs de-risk.

Practical takeaway for 1–3 DTE: The news flow supports a cautiously bullish stance, but the path is dependent on upcoming data and a still-busy earnings tape. If you are long premium, tie positions to specific catalysts and be willing to cut quickly. If you are short premium, favor defined-risk structures and be explicit about the macro scenarios that would invalidate your thesis.