Here are 3 factors that drove the big swings in the stock market last week

Last week was a tale of two markets: Industrial sectors rallied while financial and technology names buckled under the growing weight of AI fears. A mixed bag of economic data has further complicated matters. Although the S&P 500 rebounded slightly on Friday following inflation data that strengthened the possibility that interest rates will fall, that was not enough to push the index into the green for the week or convince investors that the Fed will cut interest rates next month. The S&P 500 lost 1.4% for the week, while the tech-heavy Nasdaq lost 2%. The Dow Jones Industrial Average told a different story, despite losing 1.2% for the week. It reached a record high at the close of Tuesday. Dow component and Club name Honeywell was the week's big winner, while Apple was among the laggards. .SPX .IXIC,.DJI mountain 2026-02-09 Performance of S&P 500, Nasdaq, Dow since February 9, 2026 We will see if Friday's new gain can be carried over into Monday after multiple session losses. Until then, there are three major drivers for the stock market over the last five sessions. 1. AI fears are wreaking havoc Wells Fargo and Capital One, both Club financials, were crushed last week over concerns that a new AI-driven tax planning feature could threaten the wealth management industry. Selling in both began in earnest with asset platform Altruist's announcement on Tuesday and continued for two more sessions. The financial sector regained some stability on Friday after Baird upgraded Wells Fargo shares from a sell to a hold-equivalent rating. Analysts think the bank's valuation is more reasonable after the pullback. Still, shares of Wells Fargo and Capital One are down more than 7.4% and nearly 7%, respectively, for the week. Club Portfolio Analysis Director Jeff Marks said on Friday that we may be buying some more Capital One in the coming sessions after recent weakness. Artificial intelligence models are getting more advanced by the day, and investors are choosing to hit first and sell rather than take aim before learning how real the risks really are. It's something to watch, but not something that will change the thesis yet. Big Tech's decline continued. Alphabet, technically in the communications services sector, was among the portfolio's biggest decliners, falling more than 5% last week. Investors were concerned about the firm's growing AI investments despite having an excellent quarter just a few weeks ago. Our thesis on the stock hasn't changed, which is why we bought more shares on Tuesday. Club information technology industry figures, who were criticized the previous week for fears that artificial intelligence would destroy their businesses, have stabilized. Salesforce fell less than 1% last week, while CrowdStrike and Palo Alto Networks rebounded 8.6% and 4.8%, respectively. We never thought cybersecurity stocks should be lumped in with software as a service (SaaS) stocks because their products are so important in today's hostile world. So we bought some more CrowdStrike on February 3rd. Palo Alto Networks reports earnings next week and we'll see if cyber stocks can continue to pull away from SaaS names. 2. 'Olympic-sized rally' Shares of Eaton, Honeywell, Dover, DuPont and GE Vernova continued their stellar performance in 2026. It's part of what Jim Cramer calls an "Olympic-sized rally" for industrialists and other cyclicals. This might have something to do with the emergence of Big Tech, or maybe it's just that this market likes stocks tied to the economy, which has looked pretty good lately. On Wednesday, we raised our price targets on Eaton to $425 per share from $410 and on GE Vernova from $800 to $875. In the following session the Club took some profit from Eaton, which was up over 4% last week and is up 22% since the beginning of the year. This correction doesn't mean we're any less bullish on the maker of power management solutions, whose products like GE Vernova's natural gas turbines are used in energy-hungry data centers. Consumer staples were also strong last week and have outperformed for the year. The group is up 15.6% year-to-date compared to the S&P 500's flat performance. Our leading company in the industry is Procter & Gamble, with an increase of 11.7% in 2026. We were purchasing P&G last year at a time when basic consumer products were running out. We thought we needed to hedge our large tech position in case a rotation occurred. That's exactly what happened this year. Realizing that the rise in P&G was sudden, we took some profits and are now ready to sit back with an equivalent 2 rating and see what the stock does next. 3. Mixed economic signals Last week's economic data made Wall Street even more confident that the Fed will keep interest rates steady when central bankers meet in March. Investors eyed the delayed January jobs report on Wednesday, which showed job growth was stronger than expected. The consumer price index, a key gauge of U.S. inflation, came out just two days later, showing that the cost of goods and services rose less than expected last month. Stronger employment data and a softer inflation reading were good news for both sides of the Fed's dual mission to promote employment and price stability. While it signaled that the pause in interest rates would continue next month, the slowdown in CPI increased the expectations for an interest rate cut at the end of this year. The market currently favors two to three cuts in borrowing costs in 2026. Jim reiterated last week that the performance of club names like Home Depot depends largely on what the Fed does next. In fact, he referred to the home improvement retailer as "Warsh stock"; companies that need lower rates to grow. Home Depot is tied to the housing market, which has stalled due to high mortgage rates and home prices. Kevin Warsh, President Donald Trump's pick to lead the Fed, will assume the post until Senate confirmation when current central bank governor Jerome Powell's term ends in May. Warsh, a hawk during his previous tenure as Fed governor, agrees with Trump's low interest rate mandate. The Fed's rate cuts last year and in 2024 have done little to make home loans or mortgage borrowing costs much more affordable. (See here for a complete list of stocks in Jim Cramer's Charitable Trust.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trading alert before buying or selling a stock in his charitable foundation's portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after issuing the trading alert before executing the trade. 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