U.S. equity markets ended the Feb. 10 session mixed, with the S&P 500 and Nasdaq retreating modestly as investors weighed softer-than-expected economic data against a still-resilient earnings backdrop. The session reflected a market caught between hopes for easier monetary policy and growing unease about the durability of growth in a high-rate, high-spending environment.

The S&P 500 fell 0.34% to close at 6,941.33, while the Nasdaq Composite slid 0.6% to 23,099.18. In contrast, the Dow Jones Industrial Average edged up 0.08% to a fresh record above 50,179, supported by strength in select industrial and consumer names.

Economic Data Shifts the Policy Narrative

December U.S. retail sales unexpectedly came in flat, underscoring signs that consumers are pulling back on discretionary and big-ticket purchases such as vehicles. The reading missed economists’ expectations for a 0.4% increase and reinforced concerns that consumption, a key pillar of U.S. growth, may be losing momentum as 2026 begins.

The data nudged market expectations toward a more dovish Federal Reserve. According to CME’s FedWatch tool, the probability of a rate cut as early as April rose to 36%, up from just over 32% the previous day. Still, futures markets continue to price the most likely first cut for June, coinciding with the potential confirmation of President Donald Trump’s nominee for Fed chair.

Strategists framed the dynamic as a familiar “bad news is good news” setup. Slower growth data boosts the case for lower rates, benefiting rate-sensitive sectors such as utilities and real estate, which led sectoral gainers during the session. Yet the optimism remained fragile ahead of the delayed nonfarm payrolls report due the following day.

Earnings Bright Spots Offset by Big Tech Anxiety

Corporate earnings continued to offer pockets of support. Shares of Spotify surged after the company issued a stronger-than-expected earnings outlook, helped by robust user growth and pricing power. Marriott rallied to a record high after projecting a sharp increase in fee income from co-branded credit cards, signaling sustained demand from affluent travelers.

However, gains were uneven. Coca-Cola weighed on the Dow after missing fourth-quarter revenue expectations, while S&P Global fell after issuing a profit forecast below analyst estimates, dragging peers lower.

AI Spending and Valuation Caution Resurface

Technology stocks remained under pressure as investor scrutiny intensified around capital spending tied to artificial intelligence. The communication services sector lagged after Alphabet announced a $20 billion bond sale, reigniting debate over the scale of funding required to sustain the AI arms race.

Markets are increasingly questioning whether massive planned investments by hyperscalers can translate into durable returns, particularly as economic indicators soften. With the S&P 500 hovering just below recent record levels, hesitation near technical highs added to intraday volatility.

What Investors Are Watching Next

Attention now turns squarely to the upcoming labor market data, which could either validate hopes for earlier rate cuts or reintroduce inflation and wage-growth concerns. Comments from White House officials suggesting slower job gains ahead have added another layer of uncertainty.

In the near term, markets appear poised for consolidation rather than a decisive breakout, as investors balance earnings momentum against macro risks and policy ambiguity.