Market Update as of 5 February 2026
US equities fell for a third straight session in a tech-led pullback, the 10-year Treasury yield slipped below 4.2% on softer labour data, and the ECB held rates.
US Markets
US equities declined for a third consecutive session on Thursday as a tech-led pullback weighed on sentiment. The S&P 500 fell 1.2%, the Nasdaq dropped 1.6%, and the Dow lost 1.2% as investors trimmed crowded mega-cap positions. Alphabet slipped after guiding AI-related capex towards the upper end of its range, reviving concerns over profitability and returns on investment. Despite the sell-off, underlying economic data continued to point to steady growth, with services activity expanding and inflation pressures easing modestly, offering some reassurance on the broader macro backdrop.
Bonds and Policy Outlook
The US 10-year Treasury yield slipped below 4.2%, a three-week low, as softening labour indicators strengthened expectations for Federal Reserve easing later this year. JOLTS job openings fell to a five-year low, Challenger layoffs reached the highest January level since 2009, and initial jobless claims rose sharply, largely due to weather disruptions. ADP employment growth also disappointed, reinforcing market pricing for multiple rate cuts in 2026, with the first move still expected around mid-year.
Europe
European equities ended sharply lower as disappointing earnings, cautious central-bank messaging, and weaker US labour data weighed on sentiment. The STOXX 600 fell 1.1% and the Euro STOXX 50 dropped 0.6%. The ECB held rates unchanged and struck a cautious tone despite easing inflation, tempering expectations for near-term cuts. Corporate results added pressure, with notable weakness in energy, financials, and industrial names. Data were mixed, as retail sales fell and construction activity weakened further, though headline inflation eased to 1.7%, its lowest level since late 2024.
Asia
Chinese equities retreated on Thursday amid a global sell-off in technology and commodities, with concerns over elevated valuations and heavy AI capital spending weighing on sentiment. Despite equity weakness, the offshore yuan strengthened on improved diplomatic sentiment. Japanese equities also declined as technology shares led losses, though domestic PMI data continued to signal expansion in underlying activity.
Market Volatility
Volatility rose sharply, with the VIX climbing to 21.57, near its long-term average, reflecting heightened risk aversion.
In the week ahead (9 to 13 February)
Markets will focus on US CPI, wholesale inventories, employment costs, UK GDP, and Eurozone GDP and trade data.
This update reflects market conditions on 5 February 2026. It is for general information only and does not constitute investment advice or a recommendation to buy or sell any security.
