U.S. equity markets closed sharply higher on Friday, February 6, 2026, marking a decisive rebound after days of heightened volatility and selling pressure. Investors stepped back into risk assets aggressively, driving broad-based gains across U.S., Canadian, and Brazilian markets. The sharp drop in volatility and a softer U.S. dollar reinforced a renewed sense of confidence heading into the end of the week.

Small Caps Lead the Recovery as Risk Appetite Surges

The strongest signal of renewed risk appetite came from small-cap stocks. The Russell 2000 surged 3.66 percent, significantly outperforming large-cap benchmarks. Small caps are typically the most sensitive to shifts in investor sentiment, and today’s outsized move suggests a meaningful unwind of defensive positioning built during recent volatility spikes.

The rebound indicates that investors are once again willing to price in improving domestic growth expectations and more favorable financing conditions. Strong participation from small caps also points to healthier market breadth, reinforcing the sustainability of the broader rally.

Dow, S&P 500, and Nasdaq Post Broad-Based Gains

Large-cap U.S. indices followed suit with powerful advances. The Dow 30 climbed 2.47 percent, supported by strong gains across industrials, financials, and cyclical sectors. Blue-chip stocks benefited from renewed confidence in economic stability and corporate earnings resilience.

The S&P 500 advanced nearly 2 percent, reflecting broad sector participation rather than narrow leadership. Growth and cyclical stocks both contributed, signaling that investors were rotating back into equities rather than selectively hiding in defensive areas.

Technology stocks rebounded sharply as well. The Nasdaq rose 2.18 percent, recovering a significant portion of recent losses. The rally suggests that selling pressure in growth stocks may have been overextended, with buyers stepping in as volatility eased and valuation concerns moderated.

Volatility Collapses as Fear Recedes

One of the most important developments of the session was the dramatic decline in volatility. The VIX plunged nearly 20 percent, marking one of its steepest single-day drops in recent months. Such a move indicates a rapid reduction in demand for downside protection and a shift away from panic-driven positioning.

A falling VIX often supports equity markets by lowering risk premiums and encouraging investors to re-enter positions. While volatility remains above long-term lows, today’s collapse suggests that the recent spike may have been a short-lived shock rather than the start of a prolonged stress cycle.

Canada and Brazil Join the Global Rebound

Equity markets across the Americas moved higher in sync with the U.S. In Canada, the S&P/TSX Composite Index gained 1.49 percent, supported by strength in financials, energy, and materials. Improved global sentiment and stabilizing commodity expectations helped lift the index.

Brazilian equities also advanced, with the IBOVESPA posting a modest gain. While Brazil underperformed U.S. markets, the positive close reflects steady emerging-market participation as global risk appetite improved and currency pressure eased.

Weaker Dollar Adds Tailwind to Risk Assets

The U.S. dollar weakened during the session, providing an additional tailwind for equities and emerging markets. A softer dollar eases global financial conditions, supports multinational earnings, and typically encourages capital flows into risk assets.

The combination of falling volatility and a weaker dollar created a supportive macro backdrop for Friday’s rally, amplifying the rebound across equity markets.

Looking ahead, investors will be watching closely to see whether this rebound marks a durable shift in sentiment or a short-term relief rally after extreme volatility. Key factors to monitor include upcoming economic data, central bank commentary, and whether volatility continues to trend lower. If risk appetite remains intact, markets could stabilize further, though recent swings serve as a reminder that volatility can return quickly.