Wall Street Brief (February 4): US stocks further diverged on Tuesday, with the technology sector leading declines while cyclical sectors strengthened; gold/crude oil rebounded strongly, Bitcoin plummeted

[Summary] US stocks further diverged on Tuesday, with the S&P 500 Index falling 0.84%, the Nasdaq Index plunging 1.43%, the Dow Jones Index slightly dropping 0.34%, and the Russell 2000 small-cap index edging up 0.31% against the trend. Concerns over accelerating AI penetration heated up, with the tech sector leading declines as funds flowed more into cyclical sectors such as energy and materials. In terms of major asset classes, gold rebounded sharply by 6.2% after a steep drop, crude oil rose 2.52% amid Middle East tensions, and Bitcoin fell 3.77% to around $75,000.

I. Major Events

1. Anthropic's legal plugin triggers epic sell-off in software stocks

AI developer Anthropic released Claude Cowork, a legal plugin capable of automating contract reviews and legal brief generation, triggering a market rout that wiped out approximately $285 billion in market value from the software and financial services sectors on the same day. Legal database giant Thomson Reuters plummeted nearly 18%, marking its largest single-day drop since going public, while the iShares Software ETF fell 5.6%. Jefferies described sentiment in the software sector as 'the worst in history.'

2. US Navy shoots down Iranian drone approaching aircraft carrier

The US Central Command announced that a Navy F-35C fighter jet shot down an Iranian Shahed-139 drone which was aggressively approaching the USS Lincoln in the Arabian Sea. On the same day, Iranian speedboats also threatened to seize an oil tanker. However, Iran's president subsequently made a rare expression of willingness to negotiate, and Trump confirmed that 'negotiations are underway.' Geopolitical tensions have pushed up oil prices.

3. Trump announces a $12 billion rare earth reserve plan

Trump announced the launch of 'Project Vault,' deploying nearly $12 billion to establish a strategic rare earth reserve to counter China’s dominance in critical minerals. Funding sources include a $10 billion loan from the US Export-Import Bank and approximately $1.7 billion in private capital. Related mining stocks responded positively.

II. Major Trends

1. Divergence between large-cap and small-cap stocks

Over the past three months, small-cap stocks (IWM) significantly outperformed large-cap stocks (SPY), with gains of 6.11% compared to just 1.52%. Industrial stocks (DIA) also outperformed tech stocks (QQQ) during the same period, rising 3.11% versus 0.18%. Behind this trend is capital becoming more cautious about high-valuation sectors while increasingly seeking opportunities in relatively 'cheaper' areas for potential upside.

2. Value style takes the lead

Over the past three months, value stocks (SPYV) outperformed growth stocks (SPYG), with gains of 3.21% compared to 0.23%. In an environment of fluctuating interest rates and growth expectations, the market has shown a growing preference for 'predictable cash flows,' leading to more frequent style rotations and placing greater emphasis on portfolio structure.

3. Market breadth remains healthy

The equal-weight S&P (RSP) outperformed the market-cap-weighted S&P (SPY) over the past three months, rising 4.51% versus 1.52%. This indicates that the rally is not solely driven by a few mega-cap companies; instead, more individual stocks are participating in the recovery. IWM and XMAG also showed rebound signals turning from negative to positive over the past two weeks.

III. Market Sentiment

Market sentiment has clearly weakened. The VIX fear index climbed 10.16% to 18.0, reflecting investors' more cautious pricing of risk assets, though it remains within the normal volatility range below 20. The CNN Fear & Greed Index dropped from 50 to 41, falling by 9 points in a single day and entering the 'fear' zone, indicating that short-term confidence has been impacted.

From the perspective of market structure, capital is more inclined to withdraw from technology sectors and shift towards relatively stable sectors such as energy, materials, consumer staples, and utilities. Meanwhile, cryptocurrency market volatility intensified, with approximately $2.56 billion in long and short positions liquidated within 24 hours, further pressuring risk appetite.

IV. Market Scan

1. Index ETFs

The Nasdaq 100 ETF (QQQ) led declines with a 1.54% drop, as tech stocks broadly weakened. The Russell 2000 ETF (IWM) rose slightly by 0.23% against the trend, continuing small-cap stocks' recent relative strength. There was a clear divergence between large- and small-cap stocks on the day, with funds flowing from high-valuation tech stocks into lower-valuation cyclical sectors and small-cap stocks.

2. Industry Sectors

The energy sector (XLE) led gains with a 3.24% rise, supported by US-Iran tensions and a rebound in oil prices. The materials sector (XLB) increased by 2.11%, driven by a recovery in rare earths and precious metals. Consumer staples (XLP) rose by 1.62%, and utilities (XLU) gained 1.45%, with defensive sectors continuing to attract allocation funds.

The technology sector (XLK) led declines with a 2.19% drop, as software stocks generally fell. Communication services (XLC) declined by 1.61%, mainly dragged down by Netflix. Healthcare (XLV) fell by 1.02%, with Pfizer dropping over 5% despite better-than-expected earnings.

3. Seven Major Tech Stocks

Big tech companies collectively faced pressure. Microsoft (MSFT) fell by 2.87%, NVIDIA (NVDA) dropped by 2.84%, and Meta declined by 2.08%, with selling pressure concentrated due to spillover sentiment. Netflix (NFLX) led declines with a 3.41% drop, weighed down by uncertainty over Warner Bros. Discovery's acquisition and slowing growth guidance. Tesla (TSLA) edged up by 0.04%, showing relative resilience amid a broad tech sell-off.

4. Chinese概念股

Chinese stocks broadly weakened. Bilibili (BILI) led declines with a 4.21% drop, as its high beta characteristics amplified losses. Alibaba (BABA) fell by 2.81%, and Baidu (BIDU) declined by 2.50%, following sector adjustments. PDD Holdings (PDD) edged down by 0.13%, performing more steadily given its relatively restrained valuation. A stronger dollar and declining risk appetite continued to weigh on emerging market assets.

5. Cryptocurrencies and related stocks

Bitcoin fell below $73,000 (intraday low of $72,884), dropping by 3.77% during the day. Approximately $2.56 billion in long and short positions were liquidated within 24 hours, prompting Bitwise CIO to describe this as a 'full-blown crypto winter.' Circle (CRCL) followed with a 4.59% decline.

Another standout stock on the same day was Palantir (PLTR), which surged 6.85% on better-than-expected earnings and significantly stronger-than-Wall-Street-expected 2026 guidance. The company reported a 137% surge in US commercial revenue, and the market viewed it as one of the clearer beneficiaries of AI implementation progress.

$NASDAQ 100 Index (.NDX.US)$ $Invesco QQQ Trust (QQQ.US)$ $Dow Jones Industrial Average (.DJI.US)$ $State Street® SPDR® Dow Jones Industrial Average® ETF Trust (DIA.US)$ $Russell 2000 Index (.RUT.US)$ $iShares Russell 2000 ETF (IWM.US)$ $Roundhill Magnificent Seven ETF (MAGS.US)$ $USD (USDindex.FX)$ $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ $iShares 20+ Year Treasury Bond ETF (TLT.US)$ $XAU/USD (XAUUSD.CFD)$ $CBOE Volatility S&P 500 Index (.VIX.US)$ $Bitcoin (BTC.CC)$ $BTC/USD (BTCUSD.CC)$ $Ethereum (ETH.CC)$ $ETH/USD (ETHUSD.CC)$ $iShares Ethereum Trust ETF (ETHA.US)$ $NVIDIA (NVDA.US)$ $Tesla (TSLA.US)$ $Meta Platforms (META.US)$ $Amazon (AMZN.US)$ $Alphabet-C (GOOG.US)$ $Microsoft (MSFT.US)$ $Apple (AAPL.US)$

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