The Dow Jones Industrial Average rose by around 600 points, or 0.6%, reaching the 49,600 mark due to gains in pharmaceutical stocks. Meanwhile, the S&P 500 fell by 0.5% and the Nasdaq Composite dropped 1.4%, with semiconductor and software stocks experiencing declines. A shift from technology to economically sensitive shares is ongoing amidst concerns about AI disruption.
Eli Lilly and Company surged over 7% after surpassing analyst expectations with fourth-quarter earnings of $7.54 per share on $19.29 billion in revenue. Their weight-loss drug Zepbound generated $4.2 billion in US revenue, while 2026 revenue guidance was set at $80 to $83 billion. This contrasted with Novo Nordisk A/S, which projected up to a 13% decline in sales and profit for this year.
Advanced Micro Devices Outlook
Advanced Micro Devices Inc. saw a 14% drop after its first-quarter guidance fell short of expectations amid an AI spending boom. AMD projected $9.8 billion in revenue, despite reporting record fourth-quarter earnings. The guidance led to a decline in semiconductor stocks like Broadcom Inc. and Micron Technology Inc.
Private-sector employment added just 22,000 jobs in January, below forecasts, according to the ADP report. The nonfarm payrolls report was delayed due to a partial government shutdown. ISM Services PMI remained stable at 53.8, showing consistent expansion in the services sector despite inflationary pressures.
Software stocks continued to decline over concerns about AI’s impact on traditional business models. Companies like Salesforce Inc., Oracle Corporation, and CrowdStrike Holdings Inc. extended losses. The iShares Expanded Tech-Software Sector ETF fell over 14% in recent sessions. Gold rose to about $5,050 per ounce as a safe-haven asset amidst technology sector uncertainty.
Positioning For Divergence
Based on the market’s clear rotation, we should position for continued divergence between sectors. This involves favoring long positions in pharmaceuticals and other economically sensitive areas while considering short positions in technology, particularly software and semiconductors. The split performance between the Dow and the Nasdaq yesterday reinforces that this trend has momentum.
Eli Lilly’s massive earnings beat makes it a prime candidate for bullish options strategies like buying call spreads to manage cost. With LLY solidifying its 60.5% market share in a US obesity and diabetes drug market projected to exceed $100 billion annually by 2030, its momentum appears fundamentally justified. This strength stands in stark contrast to competitors and provides a clear long opportunity within the healthcare space.
On the other side of the trade, the severe punishment of AMD despite a revenue beat signals that the AI chip sector was priced for absolute perfection. After the semiconductor index rallied over 80% in 2025, this pullback may have further to run. We can look at buying puts or bear put spreads on the broader semiconductor ETFs to hedge against or profit from continued weakness.
The rout in software stocks is a strong signal of deep investor fear about AI disruption, with sentiment described as being in capitulation. The iShares software ETF has seen record weekly outflows recently, confirming this flight from the sector. We should consider maintaining or initiating bearish positions here until a clear technical bottom is established.
The conflicting economic data, with a weak ADP jobs report but a strong ISM Services PMI, creates significant uncertainty. This tension will come to a head with the delayed Nonfarm Payrolls report, which we should watch closely. The historical disconnect we’ve seen between ADP and NFP, especially in early 2025, suggests preparing for a volatile market reaction by using straddles on major indices.
Gold’s push above $5,050 an ounce confirms the defensive mood as capital flees the turmoil in technology. This move is supported by continued central bank buying, which hit record levels in late 2025, and persistent inflation concerns from the ISM report. Using derivatives on gold or gold miners offers a direct hedge against further market chop and a potential safe-haven play.
