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.