Upcoming Earnings Reports
Upcoming earnings reports from ‘Big Tech’ firms like Meta and Tesla are eagerly awaited, with Apple set to release its figures on Thursday. Concerns around AI’s future profitability linger, despite optimism to compare it to successful internet giants.
Major health insurers saw significant losses after a 0.09% healthcare payment increase was revealed, reducing profit growth for the sector. Humana and CVS Health were notably impacted, with shares falling by 20% and 15%, respectively.
The Dow Jones Industrial Average tracks 30 major US stocks, being price-weighted rather than capitalization-weighted. Criticisms have arisen over its limited scope compared to broader indices like the S&P 500.
Various trading methods exist for the DJIA, including ETFs, futures, and options, each providing different avenues for market engagement.
Market Divergence
Looking back at the market divergence from January 2025, we see that trend has only intensified over the past year. As of today, January 28, 2026, the tech-driven Nasdaq 100 is up nearly 30% year-over-year while the Dow struggles to keep pace, showing the split between AI-fueled growth and the broader economy remains a core theme. This suggests strategies like pairs trades, going long on a tech ETF like QQQ while shorting a Dow equivalent like DIA, could continue to be profitable.
The Federal Reserve outlook we were watching in early 2025 has shifted significantly. Instead of the two rate cuts anticipated for 2026, persistent service sector inflation through last year meant the Fed only cut once, and the CME FedWatch tool now shows the market pricing in at least three cuts before this year is over. This heightened expectation for easing creates an environment where long-dated call options on interest-rate sensitive sectors may offer value, but traders should watch for volatility around upcoming CPI reports.
The questions surrounding AI capitalization in 2025 have since been answered with massive revenue growth, particularly for chipmakers and cloud providers. For example, we saw Microsoft’s Azure cloud revenue grow by over 35% in the latter half of 2025, directly tied to enterprise AI demand. Derivative traders should now focus on volatility plays around earnings for second-tier AI companies, as the market looks for the next leaders and punishes those who fail to monetize.
We can’t ignore the lesson from the healthcare sector’s sharp decline in January 2025 following the CMS payment announcement. That event shows how headline risk from a single government agency can create huge price swings, with Humana stock still trading below its 2025 peak. With ongoing political uncertainty, buying protective puts on sectors highly exposed to regulatory changes, like healthcare or regional banks, is a prudent way to hedge a portfolio, especially with the VIX currently lingering below 15.
The Dow Theory warning signs from last year, where the industrials and transports failed to confirm each other’s highs, are still relevant. We have seen consumer confidence, while up from its 2025 lows, remain fragile at a reading of 110.5 this month, according to the Conference Board. This divergence suggests traders should consider options strategies that profit from a potential market correction or increased choppiness, such as collars on major index ETFs.
