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Wall Street offered a downbeat performance last week as AI disruption fears spread beyond tech.
Strong jobs data and elevated rates pressured growth valuations, favoring value and defensive areas.
Wall Street offered a downbeat performance last week, with the S&P 500 losing about 1.4%, the Dow Jones retreating about 1.2%, the Nasdaq Composite plunging about 2.1%, and the Russell 2000 shedding about 0.9%.
AI Fear Trade
Fears around the likely ability of artificial intelligence (AI) to disrupt businesses continued last week and spread beyond the tech and software sectors.Several industries, including real estate services and financials, have been hit hard in recent days (read: AI Disruption Hit Multiple Sector ETFs: Is the Fear Overblown?).
Great Rotation in Focus
Wall Street started witnessing the “Great Rotation,” with investors shunning hot technology stocks in favor of smaller companies and other defensive sectors. The combination of “AI capex fatigue,” a resilient U.S. economy, and chances of a less-dovish Fed in the near term has led to the rotation in the market.
Investors have started demanding clearer returns on massive spending after two years of AI capex euphoria. Second, higher interest rates — with the 10-year Treasury yield over 4% — are pressuring long-duration growth valuations, pushing investors toward defensive and value sectors that normally fare better in higher-rate environments.
Upbeat Jobs Data
Nonfarm payrolls rose by a greater-than-expected 130,000 jobs in January, following a downwardly revised 48,000 increase in December. The U.S. unemployment rate ticked down to 4.3% in January 2026 from 4.4% in December, coming in slightly below market expectations of 4.4%, per Trading Economics. The economy added just 181,000 jobs in 2025.
Gold Price Under Pressure?
SPDR Gold Trust (GLD - Free Report) added only 0.4% last week. Resilient labor market conditions reinforce the Fed’s confidence in the economy, allowing policymakers to maintain elevated rates to tackle inflationary fears. The benchmark U.S. treasury yield fell to 4.04% on Feb. 13, 2026, from 4.22% recorded on Feb. 9, 2026. Bullion, in turn, is pressured by high interest rates due to its non-yielding nature.
Rally in Japan ETFs
On the international front, Japan ETFs deserve mention. These ETFs rallied as Prime Minister Sanae Takaichi’s landslide election victory on Feb. 8, 2026, strengthened expectations for pro-growth policies, including fiscal stimulus, tax reforms and deregulation.
The supportive fiscal policy could accelerate corporate earnings and economic expansion. This, along with improved growth forecasts from the Bank of Japan, has boosted investor sentiment toward Japanese equities. iShares MSCI Japan ETF (EWJ - Free Report) gained about 3.9% last week (read: Japan ETFs Soar on "Takaichi Trade": Top-Performers in Focus).
ETFs in Focus
Against this backdrop, below we highlight a few winning exchange-traded funds (ETFs) of last week.
iShares U.S. Digital Infrastructure and Real Estate ETF (IDGT - Free Report) – Up 10%
WisdomTree Cybersecurity Fund (WCBR - Free Report) – Up 8.5%
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Best-Performing ETFs of Last Week
Key Takeaways
Wall Street offered a downbeat performance last week, with the S&P 500 losing about 1.4%, the Dow Jones retreating about 1.2%, the Nasdaq Composite plunging about 2.1%, and the Russell 2000 shedding about 0.9%.
AI Fear Trade
Fears around the likely ability of artificial intelligence (AI) to disrupt businesses continued last week and spread beyond the tech and software sectors.Several industries, including real estate services and financials, have been hit hard in recent days (read: AI Disruption Hit Multiple Sector ETFs: Is the Fear Overblown?).
Great Rotation in Focus
Wall Street started witnessing the “Great Rotation,” with investors shunning hot technology stocks in favor of smaller companies and other defensive sectors. The combination of “AI capex fatigue,” a resilient U.S. economy, and chances of a less-dovish Fed in the near term has led to the rotation in the market.
Investors have started demanding clearer returns on massive spending after two years of AI capex euphoria. Second, higher interest rates — with the 10-year Treasury yield over 4% — are pressuring long-duration growth valuations, pushing investors toward defensive and value sectors that normally fare better in higher-rate environments.
Upbeat Jobs Data
Nonfarm payrolls rose by a greater-than-expected 130,000 jobs in January, following a downwardly revised 48,000 increase in December. The U.S. unemployment rate ticked down to 4.3% in January 2026 from 4.4% in December, coming in slightly below market expectations of 4.4%, per Trading Economics. The economy added just 181,000 jobs in 2025.
Gold Price Under Pressure?
SPDR Gold Trust (GLD - Free Report) added only 0.4% last week. Resilient labor market conditions reinforce the Fed’s confidence in the economy, allowing policymakers to maintain elevated rates to tackle inflationary fears. The benchmark U.S. treasury yield fell to 4.04% on Feb. 13, 2026, from 4.22% recorded on Feb. 9, 2026. Bullion, in turn, is pressured by high interest rates due to its non-yielding nature.
Rally in Japan ETFs
On the international front, Japan ETFs deserve mention. These ETFs rallied as Prime Minister Sanae Takaichi’s landslide election victory on Feb. 8, 2026, strengthened expectations for pro-growth policies, including fiscal stimulus, tax reforms and deregulation.
The supportive fiscal policy could accelerate corporate earnings and economic expansion. This, along with improved growth forecasts from the Bank of Japan, has boosted investor sentiment toward Japanese equities. iShares MSCI Japan ETF (EWJ - Free Report) gained about 3.9% last week (read: Japan ETFs Soar on "Takaichi Trade": Top-Performers in Focus).
ETFs in Focus
Against this backdrop, below we highlight a few winning exchange-traded funds (ETFs) of last week.
iShares U.S. Digital Infrastructure and Real Estate ETF (IDGT - Free Report) – Up 10%
WisdomTree Cybersecurity Fund (WCBR - Free Report) – Up 8.5%
Virtus Reaves Utilities ETF (UTES - Free Report) – Up 7.9%
Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) – Up 7.9%
Matthews Korea Active ETF (MKOR - Free Report) – Up 7.6%
iShares MSCI Global Gold Miners ETF (RING - Free Report) – Up 5.8%