Morning brief: Breadth improves as AI megacaps cool

Introduction#

U.S. equity and bond markets are closed today for Presidents Day, but positioning for the next trading session is already taking shape in global hours. According to Monexa AI, the S&P 500 finished Friday at 6,836.17 (▲ +0.05%), the Dow at 49,500.93 (▲ +0.10%), and the Nasdaq Composite at 22,546.67 (▼ -0.22%), a tape that captured a decisive rotation under the surface: mid-cap technology, healthcare, utilities and selected industrials pushed higher while several AI-heavy megacaps slipped. Volatility cooled modestly into the long weekend with the VIX at 20.52 (▼ -1.44%), offering a cautiously constructive backdrop when U.S. markets reopen on Tuesday. Overnight, European equities edged higher as risk stabilized and financials rebounded, a tone reported by Bloomberg and Reuters. Headlines remain AI-centric: investor scrutiny of Big Tech’s capital intensity is rising, while infrastructure beneficiaries and selective enablers continue to draw flows. Legal risk around AI-generated media also made the weekend tape after reports that Disney sent a cease-and-desist to ByteDance over alleged unlicensed content in its AI video tool, as reported by Reuters.

Market Overview#

Yesterday’s Close Recap#

The major U.S. benchmarks closed Friday with mixed but steady action, led by broad participation outside the largest technology constituents. According to Monexa AI, here’s how the key indices settled:

The dispersion beneath the indices was notable. Monexa AI’s heatmap shows mid-cap and infrastructure-oriented technology outperforming even as a handful of AI leaders eased. Semiconductor equipment and security outperformed with Applied Materials AMAT up +8.08%, Akamai AKAM up +6.83%, AppLovin APP up +6.47%, and CrowdStrike CRWD up +4.40%. Meanwhile, market heavyweights Apple AAPL (▼ -2.27%), Alphabet GOOG (▼ -1.08%), Meta Platforms META (▼ -1.55%), and Nvidia NVDA (▼ -2.23% per Monexa AI heatmap) lagged, tempering cap-weighted indices relative to equal-weighted gauges.

Financials reflected a similar split. Coinbase COIN jumped +16.46% and Robinhood HOOD rose +6.82% on crypto-linked flows, while Visa V fell -3.12% and large banks were largely flat (JPMorgan JPM ▼ -0.03%). In consumer cyclicals, travel and bookings names showed weakness—Expedia EXPE fell -6.41%, Norwegian Cruise Line NCLH dropped -7.57%—even as casinos and alternative lodging outperformed with Wynn Resorts WYNN up +5.14% and Airbnb ABNB up +4.65%. Defensive yield gained traction: utilities rallied broadly with Vistra VST up +5.14%, NRG Energy NRG up +6.52%, and Constellation Energy CEG up +4.46%. Basic materials saw precious metals and battery materials in demand, led by Newmont NEM +6.50% and Albemarle ALB +4.67%, while steel and industrial gases underperformed (Steel Dynamics STLD -3.92%, Air Products APD -4.03%).

Overnight Developments#

Liquidity is thin with U.S. cash markets closed, yet the tone overseas is constructive. European indices opened higher as investors processed a calmer tape after recent AI-driven volatility, with London’s financials bouncing at the start of a data-heavy week, per Reuters, and broader European benchmarks in the green, per Bloomberg. In Asia, many markets remained quiet due to Lunar New Year closures in China and South Korea, while Japan’s economy returned to growth in Q4 2025, a development that, according to weekend reporting, gives the Bank of Japan additional room to continue normalizing policy—an incremental tailwind for regional risk appetite, as covered by Bloomberg and The Wall Street Journal. On the policy and technology front, India hosts a major AI summit this week with top U.S. tech leaders expected to attend, per Bloomberg, keeping the AI narrative squarely in focus even as trading volumes ebb.

Macro Analysis#

Economic Indicators to Watch#

With U.S. markets shut today, the macro calendar turns to the remainder of the week. Recent coverage on Bloomberg flagged inflation as the pivotal narrative, with investors reassessing the trajectory of Federal Reserve policy after the latest CPI print and related commentary around rate-cut odds. According to Monexa AI, volatility gauges ended the week lower (VIX 20.52, ▼ -1.44%; RVX 25.64, ▼ -1.95%), suggesting positioning is less defensive than it was a week prior. That said, the cautious tone in megacap technology and the renewed strength in defensives imply investors are still calibrating exposure to interest-rate sensitivity and cash-flow certainty.

Globally, the Japanese growth rebound reported for late 2025 aligns with incremental policy normalization, a factor that could strengthen the yen and alter cross-asset correlations if sustained. Meanwhile, commentary on Asian currencies over the weekend pointed to potential support from U.S. rate-cut prospects, also reported by Bloomberg, a dynamic that usually favors risk assets at the margin. In Europe, the macro lens is focused on bank earnings resilience and the path of rate cuts later in 2026, with Monday’s tone indicating a modest improvement in risk sentiment to start the week.

Global/Geopolitical Factors#

Beyond rates and inflation, AI policy and intellectual property are immediate swing factors for sentiment. Reports that The Walt Disney Company DIS sent a cease-and-desist to ByteDance over alleged IP misuse in an AI video generator, as covered by Reuters, underscore that the legal framework around AI-generated content remains unsettled and could create headline volatility for platforms and content owners. Separately, the India AI summit concentrates global attention on AI infrastructure, compute supply chains, and regulatory harmonization; that backdrop is relevant for cloud providers and data-center ecosystems.

Another macro subplot is liquidity. Commentary over the weekend highlighted that heavy Treasury settlement calendars can sap excess cash and intermittently pressure risk assets; while U.S. markets are shut today, any such dynamics would likely be expressed through futures and overseas trading until the U.S. session resumes.

Sector Analysis#

Sector Performance Table#

According to Monexa AI, sector performance at Friday’s close reflected a rotation toward defensives and cyclicals with income appeal, while high-multiple technology lagged.

Monexa AI’s heatmap also flagged substantial strength across real estate services and tower/data-centric REITs—CBRE Group CBRE +4.42%, Alexandria Real Estate ARE +4.15%, Boston Properties BXP +4.10%, Crown Castle CCI +2.93%—even as the aggregate Real Estate sector printed a small decline in the sector table above. We highlight this discrepancy explicitly: the sector-level close data show a -0.41% move, while individual stock performance within key REIT subsectors was positive. This divergence may reflect differences in subsector weighting, timing, or outperformance by REIT services and towers that was offset by weakness elsewhere in real estate. For tactical purposes today, we prioritize the sector table for top-down positioning but acknowledge the bottom-up strength evident in property services and infrastructure REITs.

Utilities led the tape with merchant and regulated names advancing in tandem—NRG Energy NRG +6.52%, Vistra VST +5.14%, Constellation Energy CEG +4.46%, Eversource ES +4.32%, American Water Works AWK +4.00%—signaling a tilt toward yield and contractual cash flows as megacap volatility percolates. Energy posted broad gains led by Texas Pacific Land TPL +5.08%, APA Corp. APA +3.71%, and Marathon Petroleum MPC +2.65%, even as Exxon Mobil XOM slipped -1.03%, implying investors are emphasizing select E&P, royalty, and refiner exposures over integrated majors.

In basic materials, precious metals and battery materials led, with Newmont NEM +6.50% and Albemarle ALB +4.67%, while industrial gases and steel fell (Air Products APD -4.03%, Steel Dynamics STLD -3.92%). Consumer defensive sector performance was steadier but masked a large single-stock decline in Constellation Brands STZ -8.04%, offset by big-box and value-oriented retail strength—Dollar General DG +3.55%, Target TGT +2.72%, Costco COST +1.96%, Kraft Heinz KHC +1.97%.

Technology lagged at the sector level (▼ -0.69%), but the internals showed healthy breadth outside the largest weights. Semiconductor equipment, security, and network-edge names climbed—Applied Materials AMAT +8.08%, Akamai AKAM +6.83%, CrowdStrike CRWD +4.40%—while megacaps eased: Apple AAPL -2.27%, Microsoft MSFT -0.13%, Alphabet GOOG -1.08%, and Nvidia NVDA -2.23% per Monexa AI heatmap. Communication services told the same story: Disney DIS +3.00%, T-Mobile TMUS +2.25%, and Netflix NFLX +1.33% offsetting pressure in the ad-driven giants META -1.55% and GOOG -1.08%.

Company-Specific Insights#

Earnings and Key Movers#

Earnings and single-stock catalysts continue to dictate outsized moves. Roku ROKU rallied +8.60% Friday after reporting fourth-quarter results that topped expectations and guiding 2026 revenue to about $5.5 billion, above consensus, with Q1 revenue guidance of $1.2 billion also ahead of the Street, according to Monexa AI’s aggregation of company reports and coverage. Platform revenue growth and improving ad trends underpinned the beat, as reported in recent market summaries.

Rivian RIVN surged +26.64% on a mixed but incrementally encouraging quarter: total revenue of $1.29 billion was slightly ahead of expectations, software and services sales more than doubled to $447 million, and adjusted losses narrowed versus consensus. Automotive revenue fell year over year on delivery normalization and lower regulatory credit sales, but the margin mix from software/services sparked a rerating bid, per Monexa AI’s summary.

Akamai AKAM gained +6.83% as investors leaned into security and edge-cloud demand following strong recent results and product momentum. An insider sale disclosed by the CTO during the week was noted, but did not derail the rally given the improving growth mix, per Monexa AI’s compilation of filings and coverage. In semis-adjacent testing, Aehr Test Systems AEHR rose +3.41% on elevated options activity (calls up roughly 88% mid-week) despite a negative P/E, highlighting the continued appetite for tactical, catalyst-driven trades in the AI supply chain.

In biotech and medtech, CRISPR Therapeutics CRSP advanced +8.46% after Casgevy, its gene-editing therapy for sickle cell disease co-developed with Vertex VRTX, secured FDA approval and adoption momentum. A new $76 price target from Chardan implied roughly +43% upside from prior levels, according to Monexa AI’s aggregation of research notes.

Energy and shipping also featured. Scorpio Tankers STNG climbed +4.04% last week with Evercore ISI setting an $83 target (~+17.71% potential upside from $70.51), per Monexa AI’s research summaries, while the tanker-rate backdrop remains constructive. In homebuilders, TRI Pointe Homes TPH spiked +26.80% on a proposed $47 per-share cash sale, though the process is now under shareholder legal review, and Oppenheimer downgraded the stock to Perform amid deal scrutiny, according to Monexa AI.

Crypto-adjacent equities were a volatility center. Coinbase COIN soared +16.46% and Robinhood HOOD rose +6.82%, a move aligned with speculative flows and options activity. Traditional payments lagged, with Visa V down -3.12% and Mastercard (not shown) also softer, reinforcing the barbell between high-beta fintech and legacy networks. Oracle ORCL rose +2.34% into the weekend but faces new class-action litigation headlines alleging AI-related misstatements, according to a filing summary; we flag headline risk even as AI infrastructure demand remains a medium-term positive theme for select cloud vendors.

Healthcare’s momentum widened: DexCom DXCM jumped +7.59% on sustained CGM adoption, Molina Healthcare MOH rose +6.82%, Baxter (not shown) and Moderna MRNA +5.29% gained, and UnitedHealth UNH added +3.10%. The breadth hints at a constructive blend of growth and defensive cash-flow qualities inside health care—a useful ballast as investors rotate away from high-multiple software.

Extended Analysis: Global Overnight Shifts And The AI Bifurcation#

The overarching theme into this shortened U.S. week is an AI-led market bifurcation. On one side, hyperscalers and platform megacaps face valuation pressure as investors reassess the speed and magnitude of monetization relative to enormous capital intensity; on the other, infrastructure providers and targeted enablers continue to benefit from the buildout cycle.

Mainstream coverage has documented the scale of 2026 capex intentions: reporting compiled by Monexa AI, citing the Financial Times and The Wall Street Journal, indicates hyperscaler and Big Tech spending plans in the tens to low-hundreds of billions across data centers, GPUs, and supporting infrastructure. For example, Financial Times and Wall Street Journal coverage highlighted ambitious capex paths at Amazon, Alphabet, and Microsoft—investment that secures compute capacity and training capability but weighs on near-term free cash flow if monetization lags. That is consistent with Friday’s tape: Apple AAPL -2.27%, Alphabet GOOG -1.08%, Meta META -1.55%, and Nvidia NVDA weaker, while equipment, security, edge delivery, and select mid-cap software outperformed.

For investors, the key is to separate capex beneficiaries from capex payers. Equipment and AI supply chain names—Applied Materials AMAT and specialized testing like Aehr AEHR—are demonstrating operating leverage to the buildout. Security and edge-cloud providers such as Akamai AKAM and AI-native cybersecurity like CrowdStrike CRWD are translating AI demand into ARR and margin expansion. Conversely, large platforms must show accelerating AI-related revenue per user, attach rates, and enterprise upsell to justify sustained capex. Into the next U.S. session, watch for any incremental disclosures, channel checks, or third-party demand signals tied to AI workload migration and bookings.

The defensive rotation complements the AI bifurcation. Utilities’ strength—NRG NRG +6.52%, Vistra VST +5.14%, Constellation CEG +4.46%—reflects demand for contractual cash flows and, in some cases, exposure to power pricing dynamics linked to data-center expansion. Energy was led by selective E&P and royalty models—Texas Pacific Land TPL +5.08%—and refiners like Marathon MPC +2.65%. Staples and healthcare offered ballast, cushioning portfolios as software multiples compress.

Legal and policy friction around AI deserves attention. The reported Disney DIS action against ByteDance over AI-generated content, per Reuters, highlights IP risk that could alter the economics for platforms training on copyrighted data. Meanwhile, Europe’s steadier open, as flagged by Bloomberg, and the India AI summit keep cross-border regulatory and infrastructure themes at center stage. None of this undermines the secular AI thesis; it does, however, force investors to reward business models with clearer unit economics and nearer-term cash conversion as the cost of capital bites.

Finally, liquidity. Over the weekend, commentators warned that heavy Treasury settlements can create brief liquidity air pockets that coincide with risk-asset drawdowns. While today’s U.S. holiday limits expression in cash markets, this is a factor to monitor through futures and European hours, and into Tuesday’s U.S. reopen.

Conclusion#

Morning Recap and Outlook#

The setup into the next U.S. session is cautiously constructive. According to Monexa AI, Friday’s close showed improving breadth, lower index-level volatility, and leadership from utilities, healthcare, and selected cyclicals even as megacap AI franchises took a breather. Europe’s higher open, per Bloomberg and Reuters, and quiet Asia sessions help stabilize sentiment, while AI remains the key swing factor for both valuations and sector flows. When trading resumes in the U.S., the catalysts to watch are threefold: first, any additional color on AI infrastructure demand and hyperscaler capex/monetization; second, follow-through in Friday’s earnings-driven winners like Roku ROKU and Rivian RIVN; third, whether defensive sectors continue to attract inflows as investors rebalance away from high-multiple software.

Actionably, the barbell remains in effect. On one side are AI infrastructure and enablers benefiting from the buildout; on the other are cash-generative defensives with pricing power and income. In between, the mega platforms must prove that the next dollar of AI spend yields measurable revenue lift and durable margins. Position sizes and risk budgets should reflect the outsized single-stock volatility evident in crypto-adjacent equities COIN and high-beta software, even as broader market breadth improves.

Key Takeaways#

• According to Monexa AI, U.S. indices closed mixed Friday with the S&P 500 at 6,836.17 (▲ +0.05%) and the Nasdaq at 22,546.67 (▼ -0.22%); volatility eased (VIX 20.52, ▼ -1.44%).
• Breadth improved as mid-cap technology, healthcare, utilities, and select cyclicals outperformed while several AI-focused megacaps lagged.
• Europe opened higher on Monday, per Bloomberg and Reuters, while Asia was quiet amid holiday closures and Japan’s return to growth supports regional risk.
• Sector leadership favored utilities (+3.55%), energy (+1.64%), and basic materials (+1.56%) with technology lower (-0.69%) per Monexa AI; note the discrepancy between sector-level real estate (-0.41%) and strength in select REITs.
• Company catalysts dominated: ROKU +8.60% on a Q4 beat and higher 2026 guide; RIVN +26.64% on software/services growth; AKAM +6.83% on security/edge demand; CRSP +8.46% on Casgevy adoption.
• The AI bifurcation persists: capex-heavy megacaps face valuation pressure unless monetization accelerates, while infrastructure suppliers and enablers see improving demand; see Financial Times and WSJ coverage for capex context.
• Legal and policy risks—such as the reported Disney DIS cease-and-desist to ByteDance over AI content, per Reuters—could introduce headline volatility for platforms and IP owners.
• Near-term watchlist into Tuesday’s reopen: leadership persistence in utilities/healthcare, follow-through in earnings winners, and any fresh disclosures that bridge AI spend to revenue and cash flow at the megacaps.