Investors Brace for Volatility Amid AI Disruption and Walmart Earnings

Market Volatility and Economic Indicators

By Lewis Krauskopf

Impact of AI on Various Industries

NEW YORK, Feb 13 (Reuters) - U.S. stock investors will be on guard next week for further volatility induced by fears of artificial intelligence disruption as they also assess the durability of a rotation beneath the market's surface, along with upcoming earnings from Walmart and fresh economic data.

Walmart's Role in Consumer Spending Trends

The benchmark S&P 500 closed on Thursday down 0.2% for the year, but that modest change belies significant swings in pockets of the market.

Economic Reports and Job Growth Insights

After sinking shares of software companies this month, fears that new AI tools will disrupt various industries, including insurance, wealth management and transportation, slammed stocks this week.

"It's all this whack-a-mole game of trying to figure out what AI is going to destroy next in a world where you can invent a narrative, because this technology is so new that artificial intelligence is likely going to end up eating the whole world," said Art Hogan, chief market strategist at B Riley Wealth. "That's probably not the case, but that's where we are right now in that sentiment."

The swoons for various industries to start 2026 contrast with much of last year, when optimism over AI-driven profits and capital spending helped drive a broad swath of stocks higher.

AI winner and loser moves in single stocks "are getting more and more extreme," Jonathan Krinsky, BTIG's chief market technician, said in a note on Thursday morning.

"At a certain point ... we begin getting concerned that the weakness supersedes the strength and the broad market becomes vulnerable," Krinsky said.

ROTATIONS PAVING WAY FOR NEW MARKET LEADERS?

Pressure from AI has also contributed to declines for the heavyweight technology sector, which has mostly led the gains for the bull market that began in October 2022, but was last down over 4% this year.

Broadening gains have helped offset tech's troubles, with investors moving into groups that have lagged. Four sectors are up at least 10% in 2026 - energy, consumer staples, materials and industrials - while small-cap stocks have also posted outsized increases.

"We're starting to get an embedded leadership shift that's undeniable at this point," said Mark Hackett, chief market strategist at Nationwide. "This shift is now getting embedded into the psychology of investors." 

Tech retains a major presence in U.S. indexes, including a one-third weighting in the S&P 500. Even if tech weakness drags down the market barometers, investors have said wider participation in equity gains bodes well for the market's health.

"It's been really difficult to make those new all-time highs because of the absence of tech leadership," said Kevin Gordon, head of macro research and strategy at Charles Schwab. "But this is not necessarily a bad thing."

WALMART EARNINGS, INFLATION DATA ON TAP

Walmart's quarterly results headline the batch of corporate earnings reports due in the coming week as the fourth-quarter reporting season winds down.

The retailing bellwether offers Wall Street a view into consumer spending trends after data this week showed U.S. retail sales were unexpectedly unchanged in December. Other retailers will follow with their reports over the next few weeks, including Home Depot, Lowe's and Target.

With its stock up 20% this year, Walmart recently pushed its market capitalization above $1 trillion. It is by far the biggest company by market value in the consumer staples sector, which is up 15% in 2026.

U.S. traders face a shortened week due to a holiday on Monday. Economic reports include the advance reading of fourth-quarter GDP, a monthly consumer sentiment survey, and the personal consumption expenditures price index, a key inflation measure.

Data this week showed a surprising jump in U.S. job growth in January, suggesting signs of labor market stability.

Some of the sectors that have been part of the "catch-up trade" in recent weeks are also sensitive to the health of the economy, Gordon said.

"To some extent, that is pricing in maybe not a firm re-acceleration in the economy, but I think at least a stabilization," Gordon said.  

(Reporting by Lewis KrauskopfEditing by Rod Nickel)