Upcoming Earnings Reports

Big Tech companies like Meta and Tesla are about to release their earnings, and many are looking forward to Apple’s report on Thursday. Despite some optimism, there are still worries about how profitable AI will be in the future compared to successful internet giants. Major health insurance companies experienced big losses when a small healthcare payment increase of 0.09% was announced, which slowed profit growth for the sector. Humana and CVS Health were hit particularly hard, with their shares dropping by 20% and 15%, respectively. The Dow Jones Industrial Average tracks 30 important US stocks and is organized by price rather than company size. Critics say it has a narrow focus compared to broader indices like the S&P 500. There are different trading options for the DJIA, including ETFs, futures, and options, which provide various ways to engage in the market.

Market Divergence

Looking back to January 2025, the gap in market performance has grown over the past year. As of January 28, 2026, the Nasdaq 100, driven by tech, is up nearly 30% year-over-year, while the Dow is struggling. This shows the ongoing split between AI-driven growth and the wider economy. Strategies like pairs trading—where you buy a tech ETF like QQQ and short a Dow ETF like DIA—might still be a good bet. The outlook for the Federal Reserve has changed dramatically. Instead of the two rate cuts we expected for 2026, services inflation last year only allowed the Fed to cut rates once. Now, the CME FedWatch tool suggests the market expects at least three rate cuts before the year ends. This increased expectation for easing interest rates may make long-term call options in sensitive sectors more appealing, but traders should be cautious about potential volatility around upcoming CPI reports. Questions surrounding AI profits from 2025 have been answered with significant revenue growth, especially for chipmakers and cloud services. For example, Microsoft’s Azure cloud revenue grew over 35% in the latter half of 2025, thanks to demand for enterprise AI. Derivatives traders should now focus on volatility trades related to earnings from secondary AI firms, as the market seeks the next leaders and punishes those that can’t profit. We should also remember the healthcare sector’s sharp drop in January 2025 after the CMS payment announcement. This event demonstrated how a single government agency can cause large price swings, with Humana’s stock still trading below its peak from 2025. Given the ongoing political uncertainty, buying protective puts on sectors vulnerable to regulatory changes, like healthcare and regional banks, is a smart way to hedge a portfolio—especially with the VIX currently below 15. The warning signs from Dow Theory last year, where industrials and transports failed to align with each other’s highs, remain important. Consumer confidence has improved from its 2025 lows but is still fragile, currently sitting at 110.5, according to the Conference Board. This divergence suggests that traders should consider options strategies that could benefit from a potential market downturn or increased volatility, such as collars on major index ETFs. Create your live VT Markets account and start trading now.

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