Market Performance and Index Highlights

The broad-based gains seen at the start of February reflect a cautious optimism among institutional investors. The S&P 500’s proximity to a new record high indicates that the “buy-the-dip” mentality remains entrenched, even as Treasury yields tick upward. On Monday, the yield on the 10-year Treasury note rose to 4.28%, up from Friday’s close below 4.24%. This move in the bond market suggests that investors are pricing in a “higher-for-longer” scenario under the potential leadership of Kevin Warsh, who is often viewed as a more hawkish figure regarding inflation and the Fed’s balance sheet size.

Despite the overall positive trend, the technology sector experienced notable pockets of weakness. Nvidia, the world’s most valuable company, saw its shares decline nearly 3%. The sell-off was triggered by reports that the company’s planned $100 billion investment in OpenAI had stalled. Furthermore, reports emerged that OpenAI is actively seeking alternatives to Nvidia’s specialized AI chips, though OpenAI CEO Sam Altman later reaffirmed his company’s commitment to working with the chipmaker. These developments underscore the heightened sensitivity of “Magnificent Seven” stocks to news regarding the AI supply chain and competitive dynamics.

In contrast to Nvidia’s struggles, Palantir Technologies emerged as a standout performer in extended trading. The AI software firm reported fourth-quarter revenue of $1.41 billion, surpassing Wall Street’s estimate of $1.34 billion. This marked the company’s twelfth consecutive revenue beat. CEO Alex Karp highlighted a “massive acceleration in growth,” particularly within the defense sector. Palantir’s guidance for the coming year was equally impressive, with annual revenue growth expected to reach approximately 61%, a figure significantly higher than the consensus estimates. This performance reinforces the narrative that while hardware providers may face supply-chain hurdles, software-driven AI adoption is accelerating.

Other major movers during the session included:

Apple (AAPL): The tech giant surged 4% to reach a one-month high, a delayed but strong reaction to its recent earnings report and data showing 7% revenue growth in the App Store for January.
Tesla (TSLA): Shares rose more than 1% following the announcement that SpaceX had acquired Elon Musk’s AI company, xAI. Investors are optimistic about a potential mid-year public offering of SpaceX.
Walt Disney (DIS): The company saw a 1.7% gain after announcing that Josh D’Amaro will succeed Bob Iger as CEO. The move is seen as a crucial step in resolving long-standing succession concerns.
PayPal (PYPL): In a sharp divergence from the market trend, PayPal shares tumbled 16% due to weaker-than-expected earnings and disappointing guidance. The company’s new leadership admitted that execution has fallen short of requirements.
Rare Earth Stocks: Companies like USA Rare Earth climbed 4% following President Trump’s announcement of a $12 billion critical minerals stockpile, aimed at reducing reliance on foreign supply chains.
Mining and Materials: Newmont and Freeport-McMoRan rose more than 4% as gold and silver prices stabilized. This followed a massive sell-off in precious metals on the preceding Friday.

Monetary Policy and the Kevin Warsh Nomination

The nomination of Kevin Warsh to lead the Federal Reserve remains the most significant long-term catalyst for the financial markets. Warsh, a former Fed governor during the 2008 financial crisis, has been a vocal critic of the central bank’s massive balance sheet, which currently sits at approximately $6.6 trillion. His appointment signals a potential shift toward “regime change” in monetary policy. Market participants are split on whether Warsh will prioritize aggressive inflation control or adhere to the President’s preference for lower interest rates to stimulate growth.

The current Federal Open Market Committee (FOMC) remains divided. While the majority voted to hold rates steady in January, two voting members, Governors Waller and Miran, dissented in favor of a 25-basis-point cut. The Fed’s official statement described economic activity as “solid,” but noted that the labor market is beginning to stabilize. Jerome Powell has indicated that the next move will likely be a cut, but only once it is clear that the inflationary impacts of recent tariffs are transitory. This “dovish hold” approach may be challenged if January’s inflation data, which showed a 0.5% increase in the Producer Price Index (PPI), continues to trend upward.

Consumer sentiment has become a growing concern for economists. The Conference Board’s Consumer Confidence Index plunged nearly 10 points in January, falling to 84.5. More alarming was the decline in the Expectations Index to 65.1, a level typically associated with an impending recession. Consumers expressed anxiety over current conditions and future economic prospects, a sentiment that crosses political lines. This drop in confidence comes despite a strong GDPNow estimate of 4.2% for real GDP growth in the fourth quarter, highlighting a disconnect between macroeconomic data and the “kitchen table” experience of American households.

Commodities and Digital Assets

The commodities market experienced a period of stabilization following the extreme volatility of late January. Gold futures, which had soared above $5,625 per ounce before plummeting 9% on “Profit-Taking Friday,” traded around the $4,700 mark on Monday. Silver futures recovered 2.5% to reach $80.50 an ounce after hitting intraday lows of $71.20. The wild swings in precious metals are largely attributed to a strengthening U.S. dollar and rising Treasury yields, which reduce the appeal of non-yielding assets. The U.S. Dollar Index rose 0.7% to 97.64 but remains near its lowest level in four years.

Bitcoin also found a footing after dropping to its lowest level since April 2024. The premier cryptocurrency traded near $78,100, recovering from overnight lows of $74,500. Analysts attribute the recent pressure on digital assets to the announcement of “Liberation Day” tariffs, which created a general “risk-off” environment. However, the stabilization on Monday suggests that institutional support for Bitcoin as a macro hedge remains intact. Traders are now closely watching the $80,000 resistance level as a gauge for whether the digital asset market can sustain a broader recovery alongside equities.

Earnings Outlook: Alphabet and AMD

Looking ahead, the market’s focus will shift to heavyweight earnings reports from Alphabet and Advanced Micro Devices (AMD). Alphabet is scheduled to report its fourth-quarter results on Wednesday, with traders anticipating a move of at least 5% in the share price. The company has already set multiple record highs this year, buoyed by a 25% rally since its October report. Investors are particularly interested in Google’s Cloud revenue and the integration of generative AI into its core search business. Options pricing suggests the stock could potentially reach $362 if the results exceed expectations.

AMD is also in the spotlight as it prepares to release its results. While the company has projected revenue growth of more than 20%, Wall Street remains cautious about the balance between its PC processor business and its AI-accelerator sales. AMD shares rose 2% on Monday in anticipation of the report. The performance of these tech giants will be a litmus test for whether the AI-driven bull market has further room to run or if the market is entering a phase of consolidation after a historic January run.

Frequently Asked Questions

Why did the Dow Jones increase by 515 points on February 2? The surge was driven by a combination of “dip-buying” after a late-January sell-off, the announcement of a trade deal with India, and strong performance in memory-chip and retail stocks.
Who is Kevin Warsh and why is his nomination significant? Kevin Warsh is a former Fed governor nominated to replace Jerome Powell as Fed Chair. His nomination is significant because he is known for his critical views on the Fed’s large balance sheet and may usher in a more hawkish monetary policy.
What caused Nvidia’s stock to decline despite the market rally? Nvidia’s decline was primarily due to reports that its $100 billion investment plan in OpenAI had stalled and news that OpenAI is exploring alternative chip suppliers.
How did the precious metals market react? Gold and silver prices began to stabilize after a massive sell-off the previous Friday. Gold traded near $4,700 while silver rose to over $80 an ounce.
What is the status of the government shutdown? A partial government shutdown began at midnight on January 31, 2026, after Congress missed its funding deadline. While the market initially shrugged off the news on Monday, it remains a point of concern for future growth.
What should investors watch for in the coming days? Key events include earnings reports from Alphabet (Google) and AMD, as well as further updates on the trade deal with India and the Federal Reserve’s leadership transition.

Conclusion

The stock market’s performance on February 2, 2026, demonstrated a resilient investor base capable of weathering significant political and monetary shifts. The combination of a major trade deal with India, strong earnings from AI-centric companies like Palantir, and a stabilizing commodity market provided the necessary momentum for a sharp recovery. However, the underlying tensions remains visible. The nomination of Kevin Warsh, the looming government shutdown, and the divergence in consumer confidence suggest that volatility is likely to persist throughout the first quarter. As the earnings season continues, the ability of megacap tech firms to justify their valuations will be the primary driver of market direction in the weeks to come.