Dow, S&P 500 and Russell 2000 Close at New Highs

Stocks rose after economic data and yesterday’s Fed rate cut with a dovish 2026 outlook, pushing the Dow to a 646-point gain (+1.34%) while the S&P 500 and Russell 2000 ticked up modestly and the Nasdaq slipped 0.25% as the AI-led rally shows signs of rotation; Oracle’s softer results raised concerns about the trade’s breadth. After the close Broadcom beat estimates (Q4 EPS $1.95 vs. $1.87; revenue $18.02B vs. $17.50B), reported AI semiconductor revenue up 74% YoY, raised fiscal Q1 revenue guidance to $19.1B and projected a $8.2B AI semi business next year, sending shares higher and extending its +75% YTD gain. Costco posted mixed fiscal Q1 results (EPS $4.50 vs. $4.26; sales $65.98B vs. $67.33B est.) and Lululemon jumped >10% after a strong Q3 beat ($2.39 on $2.6B) even as CEO Calvin McDonald announced he will step down Jan. 31, underscoring active stock-level dispersion amid a potential transition from the AI “first wave” to new growth leaders.

Analysis

U.S. equities reacted positively to fresh economic data and yesterday’s Fed rate cut with a dovish 2026 outlook: the Dow rallied +646 points (+1.34%), the S&P 500 added +14 points (+0.21%), the Russell 2000 rose +31 points (+1.21%) while the Nasdaq slipped -60 points (-0.25%) as the AI-led leadership showed signs of rotation. Oracle’s softer results were flagged as evidence that the broad AI trade may be losing momentum relative to stretched valuations, increasing dispersion across large-cap tech names.

Broadcom reported fiscal Q4 EPS of $1.95 versus $1.87 consensus and revenue of $18.02B versus $17.50B, with AI semiconductor revenue up 74% year-over-year; management raised fiscal Q1 revenue guidance to $19.1B and pegged next year’s AI semi revenue at $8.2B, driving a ~3% after-hours uptick and extending a +75% YTD gain. Those figures reinforce Broadcom’s secular AI exposure and make guidance execution the key near-term catalyst.

Retail earnings were mixed: Costco beat EPS at $4.50 but missed sales at $65.98B versus $67.33B est., while Lululemon jumped >10% after a Q3 beat ($2.39 on $2.6B) even as CEO Calvin McDonald announced his Jan. 31 departure. The combination of macro policy support, selective beat-and-raise reports and headline-level dispersion implies a rotation toward fundamentally validated AI plays and active stock selection in consumer names.

Key Decisions for Investors

• Consider adding selective exposure to Broadcom given its Q4 beat, +74% AI semiconductor growth and raised fiscal guidance, but size new positions modestly because shares are up ~75% YTD and execution risk matters
• Reduce or hedge high-valuation, pure-play AI longs after Oracle’s weaker print signaled greater dispersion; rotate into AI beneficiaries with demonstrated revenue/guidance upside
• Maintain a neutral-to-hold stance on Costco: EPS beat offsets a sales miss and lower tax benefit, so monitor comparable-sales and margin trends before increasing exposure
• Treat Lululemon as a tactical buy-on-strength opportunity after the >10% post-earnings move, but limit position size until management succession and the next-quarter cadence are clarified