Market Analysis Summary
Dow Jones Hits 50,000 as Japan's Takaichi Landslide Further Boosts Sentiment
Author: Tony Sycamore, Market Analyst
Publication Date: Sunday, 08 February 2026
US Market Rebound and Rotation Trends
The US equity markets experienced a significant rebound, with the Dow Jones Industrial Average surpassing the 50,000 mark for the first time, closing the week up 1,223 points (2.50%). This surge was attributed to a rotation from technology stocks into cyclical stocks, driven by positive economic indicators, particularly a stronger-than-expected manufacturing purchasing managers' index (PMI).
In contrast, the Nasdaq 100 index fell approximately 1.87%, impacted by concerns regarding high valuations, potential disruptions from artificial intelligence, and capital expenditure commitments. Analysts suggest that a short Nasdaq/long Dow Jones pairs trade could be a strategic approach to capitalize on this rotation, with adjustments made for the Nasdaq's higher volatility.
Japan's Political Impact and Broader Market Effects
The political landscape in Japan has also contributed to market sentiment. Prime Minister Sanae Takaichi's coalition secured a two-thirds supermajority in a recent snap election, allowing for aggressive fiscal stimulus measures, including tax cuts and increased spending in key sectors such as defense and technology. This development is expected to bolster Japanese equities while negatively impacting the yen and Japanese government bonds (JGBs).
The optimism from Japan has positively influenced broader Asian markets, particularly benefiting exporters and cyclical stocks.
Economic and Earnings Outlook
Looking ahead, the US fourth-quarter earnings season is set to continue with reports from several major companies, including Spotify, Robinhood, and McDonald's. A key economic event to watch is the upcoming non-farm payrolls report, which is anticipated to show an addition of 70,000 jobs for January, with the unemployment rate expected to remain steady at 4.4%.
Recent data indicated that the US economy added only 50,000 jobs in December, falling short of expectations, although the unemployment rate did decrease slightly.
Technical Analysis
Nasdaq 100
The Nasdaq 100 has recently shown signs of weakness, forming a potential double top and experiencing bearish divergence on the relative strength index (RSI). A sustained break above the resistance level of 26,150 - 26,200 is necessary for a bullish outlook, while a continued correction could see it test the 200-day moving average at 23,700.
Dow Jones
After a period of consolidation, the Dow Jones has broken through the psychological barrier of 50,000. If it maintains support above 49,600 - 49,500, there is potential for further gains towards 51,000. Conversely, a drop below this support could indicate a deeper pullback towards 48,500.
Conclusion
The current market dynamics reflect a significant shift in investor sentiment, influenced by both domestic economic indicators and international political developments. The rotation from tech to cyclical stocks, alongside Japan's fiscal policies, sets the stage for potential opportunities and risks in the coming weeks.