MW Investors see hope in the economy despite AI fears igniting a turbulent week for markets

By Vivien Lou Chen

Worries about the disruptive force of AI are competing with positive tones on the economy

The destructive power of artificial intelligence on industries like financial-management services is at the forefront of investors' minds.

Investors are about to wrap up an unusual week in the stock market, when surprisingly strong job gains for January and an easing annual rate of consumer-price inflation failed to erase jitters about artificial intelligence's capacity to destroy industries.

Worries about this impact from AI remained in place during the early part of Friday, with stocks switching from early losses to gains despite a January consumer-price index which showed the annual headline and core rates of inflation dropping - the latter of which fell to a five-year low of 2.5%. Ordinarily, a CPI report that comes in either as expected or softer than anticipated tends to be seen as good news, particularly after Wednesday's January nonfarm-payrolls report showed the U.S. added 130,000 new jobs for the biggest gain in 13 months.

The Dow Jones Industrial Average DJIA, S&P 500 SPX and Nasdaq Composite COMP were up Friday, but have each failed to eke out closing gains during the past two or three sessions leading up to the weekend. Meanwhile, Wall Street's "fear gauge," the Cboe Volatility Index VIX, briefly jumped to a one-week high above 21 on Friday, up from as low as 17.2 on Thursday and 18 at the start of this week.

"The stock market has been keyed more to worries over the fallout from artificial intelligence than reasonably good economic data featuring a strong employment report and satisfactory news on inflation," said Gary Schlossberg, a global strategist at Wells Fargo Investment Institute in San Francisco. "At the very least, what's unusual is that the market is not following visible economic data. It's following market-specific factors, and uncertainty about the impact of AI is overshadowing or masking the rotation into more traditional sectors."

Investors have found shelter from this storm in less economically sensitive parts of the market, such as utilities XX:SP500.55, materials XX:SP500.15 and consumer staples XX:SP500.30, which are all up for the week - suggesting there's no broad-based loss of confidence in the economy or stock market occurring right now. At last check, the utilities sector of the S&P 500 was set to log a 7% gain on the week, while materials were on pace for a 4.2% gain and consumer staples were up 1.9% on a weekly basis. Energy XX:SP500.10, which is up by 1.8% over the past five days, has benefited from geopolitical tensions centered on Iran, which have periodically outweighed weak fundamentals tied to oversupply, according to Schlossberg.

Thursday's trading session handed all three major stock indexes their sharpest daily drops in three weeks, according to Dow Jones Market Data, as fears about AI's disruptive force swept beyond the tech and software sectors and into industries such as insurance and financial-management services. On Wednesday, equities also got hammered despite January's surprisingly strong jobs report, action which strategists chalked up to a more complicated outlook for inflation and interest-rate cuts by the Federal Reserve.

Read: Dow ends below 50,000 threshold for first time since Friday as AI fears spark wider stock selloff

Also: Stocks have turned volatile despite strong January jobs report. Here's why investors aren't happy.

"AI is disrupting a lot of things," but it's also doing so based on the expectation of a disruption that hasn't actually happened yet, said Liz Thomas, head of investment strategy at SoFi. While some companies could end up consolidating or changing their business models, this doesn't mean entire industries will disappear, she added.

Meanwhile, "there's been this really violent rotation under the surface of equities," Thomas said, noting the move away from several megacap tech companies and software stocks into other areas of the equity market. The iShares Expanded Tech-Software Sector ETF IGV was down 21.3% on the year through Friday, according to FactSet. It may take a broad "washout" in the tech sector or equities overall for investors to feel more confident that prices have found a bottom, according to Thomas.

Chris Zaccarelli, chief investment officer for Northlight Asset Management in Charlotte, N.C, described this week as "strange" given the release of the January jobs report on Wednesday, instead of its usual spot on the Friday of every month. In an email, he said that although the market is going through some volatility right now, "the bull market is likely to remain intact as long as the economy continues to grow, the labor market holds up and inflation measures continue to fall."

The Dow was on pace for a 0.8% weekly loss, the S&P 500 was down 0.7% and the Nasdaq was 1.3% lower, according to FactSet data at last check.

Joy Wiltermuth contributed.

-Vivien Lou Chen

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February 13, 2026 13:02 ET (18:02 GMT)

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