Good morning, investors. The boring old Dow Jones Industrial Average hit yet another record high on Tuesday — one day before the government releases a highly anticipated jobs report.

For today’s edition, we’re turning our attention to the latest AI-induced stock sell-off.

When it comes to AI, investors have made a habit of selling first and asking questions later.

The same instinct that crushed software stocks last week led to a sell-off in financial services names on Tuesday, following the release of an AI-powered tax-planning tool that implied redundancies for advisory work.

Shares of LPL Financial, Charles Schwab and Raymond James all tumbled more than 7% after the fintech platform Altruist unveiled a program that can generate personalized tax strategies in minutes.

That negative sentiment seeped over to Wall Street giants including Morgan Stanley and JPMorgan, which each fell more than 1%.

Taken together with the “SaaSpocalypse” of a few days ago, it does appear AI is forcing investors to reprice entire sectors in real time.

And as promising as the new AI tools may be, much of the market’s response looks knee-jerk and overdone.

Indeed, reality is rarely so black and white. It’s hard to conceive of a world without legacy software or financial services.

Harder still to imagine is a stock market without those verticals.

What AI is doing is shifting where value accrues within sectors.

Tasks built around routine analysis or documentation — once scarce but now scalable with AI — are rapidly losing pricing power.

Meanwhile, businesses anchored in distribution, brand trust, and client relationships appear positioned to retain advantages that technology alone can’t replace.

That distinction explains why the sell off in software and financial services happened first at the sector level.

It’s not so surprising that, in the face of uncertainty, investors reached for blunt instruments, dumping ETFs and broad baskets rather than attempting stock-by-stock judgements.

Winners and losers will emerge soon enough, but not before the market can differentiate between companies that use AI to improve margins versus those that shrink.

Claiming that AI is erasing entire sectors of the stock market feels short-sighted.

A more accurate view is that AI is accelerating a market dominated by stock pickers.

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📉The US is expected to have added 75,000 jobs in January. That’s the median estimate as tracked by FactSet. That would mark the largest increase since September, and also be above the trailing 12-month average of 48,700. (FactSet)

📊Non-tech stocks are outperforming to start the year. Energy, materials, and staples have crushed the Magnificent 7 and Big Tech in 2026 so far. Those “real economy” stocks are leading a broad rotation. (Barron’s)

⛪ The Vatican wants to get involved in equities. Its bank launched two equity indexes tracking stocks that it said are consistent with Catholic ethical principles. This sets up a potential licensing for ETFs down the line. (CNBC)

I sat down with Hamilton Reiner, JPMorgan Asset Management CIO and head of US equity derivatives, to discuss portfolio positioning for 2026, options as a hedge, income ETFs, the AI trade and anecdotes from Lehman Brothers in 2008.

Tune in on YouTube, Spotify, or Apple Podcasts.

🗓 February 11, 1994: Global bond prices plunged one week after the Federal Reserve’s first rate hike in five years, triggering a historic bond rout.

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