AI Disruption Keeps US Markets Volatile Amid Jobs and Earnings Reports

Market Volatility Driven by AI and Economic Data

By Lewis Krauskopf

NEW YORK, Feb 27 (Reuters) - Prospects for artificial intelligence to disrupt business sectors should keep the U.S. stock market on edge in the coming week, as Wall Street looks for more insight into how the emerging technology will reverberate through the economy.

The monthly U.S. jobs report headlines economic data due next week, while major semiconductor player Broadcom is among the remaining reports that will close out the fourth-quarter earnings season.

AI's Disruptive Impact on Sectors

The disruptive potential of AI has consumed investors in recent weeks, with shares in industries such as software, wealth management and real estate services pummeled by concerns about business upheaval.

Winners and Losers in the AI Era

"There continues to be this ... back and forth about who might be the victim and those that will actually emerge winners because they are harnessing AI as opposed to being replaced by it," said Kristina Hooper, chief market strategist at Man Group.

"There is very little definitive right now about that, and so I think that will continue to be a concern."

Market Sensitivity to AI Developments

Stock prices in areas such as software remain acutely sensitive to AI-related developments. AI bellwether Nvidia's highly anticipated quarterly report failed to calm nerves, with the semiconductor giant's shares falling over 5% on Thursday and weighing on the technology sector. Investors are concerned about whether Nvidia's "hyperscaler" customers will garner sufficient returns to justify their massive spending on data centers and other infrastructure.

Sector Performance and Market Trends

Despite the tech sector's struggles, gains this year in other areas such as industrials and consumer staples have helped support major equity indexes.

Weakness in tech and financial shares dragged on major averages on Friday, with the S&P 500 and Nasdaq Composite in February both posting their biggest monthly percentage declines in about a year.

The benchmark S&P 500 was up 0.5% so far in 2026 as of Friday.

"The U.S. equity market is sort of in its late cycle, trying to find the winners and losers of this new disruptive technology and pretty much treading water," said John Velis, Americas macro strategist at BNY.

Key Economic Data and Earnings Reports

Will February Jobs Back January's Strength?

The U.S. jobs report for February, due on March 6, is expected to show an increase of 60,000 jobs, according to a Reuters poll. It comes after January's surprisingly robust report, with an increase of 130,000 jobs and the unemployment rate falling to 4.3%.

The January report allayed worries about a weakening labor market, but "the concern is that January is a one-off," said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management.

"We saw a good January jobs report, but we also have seen a really weak 2025 for the job market," Hooper said. "And so the question becomes, where do we go from here?"

Federal Reserve Policy Outlook

Investors will also seek clues from the report about when the Federal Reserve may next cut interest rates. Fed funds futures suggest the next reduction will come in June or July, after Fed Chair Jerome Powell's term ends in May and his nominated replacement Kevin Warsh could be in charge.

The Fed cut rates last year in the face of a weakening employment backdrop but paused the easing cycle in January, and solid jobs data could prompt investors to push back their expectations for further cuts. Investors generally associate lower interest rates with higher prices for stocks and other assets.

BNY's Velis said the market's reaction to the jobs data will be telling for which factors are prominent for equity investors. For example, strong data followed by weak stock performance is "going to be a sign that the rate argument is important," Velis said.

Retail Sales, Broadcom Earnings Also Up Next

Other economic releases due in the coming week include reports on manufacturing and services sector activity. The retail sales report for January is expected on March 6.

Aside from Broadcom's quarterly report on Wednesday, results are expected from retailers Best Buy and Target.

AI's Broader Economic Impact

Wall Street is eager for any evidence of AI's impact on the economy, both positive and negative. In an interview with Reuters this week, outgoing Atlanta Fed President Raphael Bostic said the U.S. may be entering a period of structurally higher unemployment as firms deploy AI tools to save labor.

"Major technological shifts provoke both excitement and anxiety," Keith Lerner, chief investment officer at Truist Advisory Services, said in a research note on Thursday. "More recently... optimism has begun to give way to heightened anxiety and increasingly bleak narratives about AI’s impact on work, productivity, and economic outcomes."

(Reporting by Lewis Krauskopf; editing by Colin Barr, David Gregorio and Nick Zieminski)