Market Analysis: U.S. Equities Rally on Manufacturing Data While Precious Metals Experience Historic Correction

The February 2, 2026 trading session demonstrated robust gains across major U.S. indices, with the Dow Jones Industrial Average advancing 1.1% to 49,407.67 points [1][0]. The S&P 500 gained 0.86% to close at 6,976.45, while the NASDAQ Composite rose 0.95% to 23,592.11 [0]. Notably, the Russell 2000 small-cap index outperformed with a 1.37% advance, indicating broad-based market participation beyond large-cap equities [0].

The primary catalyst for the equity rally was stronger-than-expected U.S. manufacturing data. Recent durable goods orders for November 2025 surged 5.3% month-over-month, beating consensus estimates of 3.8% growth [4]. This sharp rebound suggests renewed business confidence in capital expenditure decisions, though it should be noted that the ISM Manufacturing PMI remained in contraction territory at 47.9% in December 2025, marking the 10th consecutive month of manufacturing sector contraction [7][8].

The sector performance breakdown reveals significant rotation patterns that merit attention [0]. Consumer Defensive stocks led with a 2.56% gain, followed by Consumer Cyclical (+1.24%), Technology (+1.13%), and Industrials (+0.86%). This performance profile indicates investor confidence in domestic consumption fundamentals despite ongoing manufacturing sector challenges. The industrials sector’s advance aligns with the positive durable goods data, suggesting market participants are pricing in improved business investment prospects [0].

Conversely, defensive rate-sensitive sectors underperformed significantly. Utilities declined 2.14%, while Real Estate fell 0.67% and Communication Services dropped 0.44% [0]. This sector rotation pattern—cyclicals advancing while rate-sensitive sectors decline—is consistent with expectations for continued economic growth and potential monetary policy adjustments under the incoming Federal Reserve leadership.

Manufacturing-sensitive stocks demonstrated notable strength tied to the positive data [0]. Caterpillar (CAT) traded at its period high of $690.91, reflecting an 86.53% period gain and suggesting strong industrial momentum. Boeing (BA) advanced 51.30% over the period, while GE Aerospace gained 66.87% [0].

The commodity markets experienced a historic correction, particularly in precious metals [1][2][3]. Gold futures fell 1.9% on February 2, with spot gold dropping 3.2% to approximately $4,708.19 per ounce—representing a decline of roughly $900-$950 from the all-time high near $5,600 reached just days earlier on January 29 [2][3]. The precious metals rally that had generated substantial gains throughout late 2025 and early 2026 was effectively wiped out.

Silver experienced an even more dramatic collapse, shedding approximately 33% over the two sessions leading to February 2 [1][2]. Spot silver dropped 3.4% to $81.65 per ounce, down from last week’s peak of $121.64 [2]. On January 31, silver plunged 31% to $78.53 per ounce—the largest single-day percentage decline since March 27, 1980 [3]. This extraordinary move reflected a combination of technical selling, forced liquidation, and speculative unwind.

The primary catalyst for the precious metals decline was CME Group’s announcement on January 30 of higher margin requirements for precious metals futures, effective after the Monday close [2]. This regulatory action forced speculative traders into selling positions and triggered margin calls, creating what market analysts described as a “feedback loop” of selling pressure [2]. The margin hike specifically targeted the speculative positioning that had driven metals prices to record highs.

An additional factor influencing market dynamics was President Trump’s nomination of Kevin Warsh as Federal Reserve Chair, announced January 30 [2][9]. This nomination introduced monetary policy uncertainty that affected both equity and commodity valuations. While Warsh has indicated support for rate cuts in certain circumstances, his historical hawkish leanings and potential focus on reducing the Fed’s balance sheet created expectations of dollar-strengthening policies [9].

The combination of Fed leadership transition uncertainty and CME margin action created a particularly volatile environment for dollar-priced assets, including precious metals. A strengthening dollar index made gold and silver more expensive for foreign currency holders, adding selling pressure [2].

The February 2 trading session revealed a significant shift in cross-asset correlations that warrants monitoring. Historically, precious metals have often moved inversely to Treasury yields and the dollar, particularly during periods of monetary policy uncertainty. However, the simultaneous equity rally and precious metals decline suggest a normalization of risk appetite rather than a pure flight-to-quality dynamic. The strength in consumer discretionary and cyclical sectors alongside weakness in utilities indicates investors are repositioning for continued economic growth rather than recession risks.

The precious metals correction, while potentially overdone from a fundamental perspective, has created substantial technical damage that may persist [2]. Barclays research noted that the fundamental case for gold—fiscal expansion concerns and fiat currency debasement—remains intact [2]. However, the forced selling dynamic triggered by CME margin hikes has disrupted the technical structure that had attracted momentum traders. The 33% collapse in silver over two sessions represents an extreme move that may require time to stabilize, as leverage continues to work out of the system.

The positive durable goods data presents an interpretive challenge. While the 5.3% surge in November durable goods orders represents a meaningful rebound from prior weakness [4], the ISM Manufacturing PMI’s continued contraction at 47.9% suggests underlying structural challenges persist [7][8]. The divergence between durable goods orders (a flow measure) and the manufacturing survey (a diffusion index) may reflect timing differences or sector-specific strength. Market participants should avoid interpreting a single positive data point as definitive evidence of manufacturing sector recovery.

The precious metals ETF complex experienced significant stress despite period gains [0]. The iShares Silver Trust (SLV) had generated a 155.07% period return but faced substantial near-term pressure, trading around its 20-day moving average of $83.45. Similarly, the SPDR Gold Shares (GLD) showed a 77.15% period gain but declined sharply in recent sessions, trading near its 20-day moving average of $438.28 [0].

Gold mining stocks demonstrated extreme period performance but face headwinds [0]. Newmont (NEM) recorded a 107.87% period gain, while Agnico Eagle Mines (AEM) advanced 129.90%. Both stocks traded near their 20-day moving averages, suggesting continued volatility as gold prices correct from record levels [0].

The commodity market volatility presents significant risk considerations that market participants should monitor carefully. The CME margin hike has created a forced selling dynamic that may take additional time to fully resolve, and overleveraged positions could face continued pressure if prices fail to stabilize [2]. The historical pattern of silver declines—particularly the 31% single-day drop—suggests elevated tail risk during correction phases [3].

Manufacturing sector uncertainty remains elevated despite positive durable goods data. The ISM Manufacturing PMI below 50 for ten consecutive months indicates structural challenges that a single positive data point cannot resolve [7][8]. Market participants should maintain appropriate skepticism about trend reversals based on limited data.

Federal Reserve policy uncertainty under the incoming leadership introduces additional complexity. Kevin Warsh’s historical advocacy for balance sheet reduction and potentially tighter monetary policy creates divergence from current market expectations [9]. Confirmation hearing developments and policy signal clarity will be critical inputs for near-term market direction.

The sector divergence pattern—2.14% utilities decline alongside cyclical sector strength—suggests rotation toward risk assets that may prove premature if manufacturing weakness persists [0]. A potential reversal in this rotation could create volatility in recently outperforming sectors.

Despite elevated risks, several opportunity considerations emerge from the analysis. The precious metals correction, while severe, has brought prices back to levels that may represent value for longer-term investors focused on structural themes including fiscal expansion and currency debasement concerns [2]. The fundamental case for gold remains intact according to major research houses, suggesting the correction may create entry opportunities for patient capital.

Manufacturing-sensitive stocks at or near period highs—including Caterpillar at $690.91—demonstrate business investment confidence that, if sustained, could provide continued equity market support [0]. The durable goods rebound suggests capital expenditure cycles may be reviving, benefiting industrials and related sectors.

The Russell 2000’s 1.37% outperformance indicates small-cap momentum that, if sustained, could broaden market participation beyond large-cap indices [0]. This breadth improvement would be a constructive development for overall market health.

The February 2, 2026 market session demonstrated a clear divergence between equity and commodity performance. U.S. equities rallied on manufacturing data, with the Dow gaining 1.1% and cyclicals outperforming defensive sectors. Consumer defensive stocks rose 2.56%, consumer cyclicals advanced 1.24%, technology gained 1.13%, and industrials added 0.86%, while utilities declined 2.14% and real estate fell 0.67% [0][1].

Precious metals experienced historic volatility. Gold declined approximately $900-$950 from its all-time high to around $4,708 per ounce, while silver collapsed 33% from recent peaks [1][2][3]. The CME margin requirement increase for precious metals futures was the primary catalyst, triggering forced selling and margin call dynamics [2].

Manufacturing data showed improvement but mixed signals. Durable goods orders surged 5.3% in November 2025, yet the ISM Manufacturing PMI remained in contraction territory for the tenth consecutive month at 47.9% [4][7][8]. The durability of the manufacturing recovery remains uncertain.

Federal Reserve leadership transition under Kevin Warsh introduces monetary policy uncertainty that may influence dollar strength and interest rate expectations [9]. Market participants should monitor confirmation proceedings for policy signal clarity.

The information gaps identified include the specific manufacturing index triggering the rally, Fed policy implications under new leadership, the extent of margin call cascade effects, and whether precious metals have reached a structural top or are experiencing a correction. Continued monitoring of manufacturing data trends, Fed confirmation hearings, commodity market stabilization, sector rotation dynamics, and dollar trajectory will be essential for near-term market positioning.