By Teresa Rivas
Consumer staples stocks have been enjoying their time in the sun this month, outshining tech for once as AI fears renewed investors' search for safety.
But Coca-Cola's latest earnings show that markets can't rely entirely on staples to fill the void when tech stocks are lagging. If anything, the report is a reminder that tech is still where the growth is at.
Staples had a terrible 2025, with the State Street Consumer Staples Select Sector SPDR exchange-traded fund basically going nowhere. In comparison, the Magnificent Seven big tech stocks -- Google parent Alphabet, Amazon.com, Apple, Facebook parent Meta Platforms, Microsoft, Nvidia, and Tesla -- were the engine behind the S&P 500's more than 16% rally last year.
Yet that pattern had reversed in recent days, as many tech names fell out of favor and investors flocked to havens like food and beverage makers. The Staples ETF was up 13% this year through Monday, compared with a 3.2% drop for Roundhill Magnificent Seven ETF.
That reversal set up big expectations for Coca-Cola's earnings report Tuesday. It didn't deliver.
Coke's fourth-quarter earnings per share did edge past consensus by two cents, but its revenue came in short of expectations, and it is forecasting organic revenue growth of 4% to 5% in 2026, lower at the midpoint than the 5% growth Wall Street was looking for. Shares of Coke slipped more than 1% following the report.
In this environment of higher expectations, Coke's report "and its share price reaction take on heightened meaning," as Evercore ISI strategist Julian Emanuel puts it.
Yet Coke -- and staples more broadly -- have long been struggling with meeting investor growth expectations, in contrast to tech. The fact that tech earnings have held up not only makes tech stocks' rally (and their high valuations) more understandable, but is a reason to hope that they can continue to bounce back.
In fact, earnings growth is what gives Thomas Matthews, head of markets in the Asia-Pacific region at Capital Economics, hope that the market can record a fourth year of tech-driven bull market gains.
"We think the tech-led rally in the S&P 500 will resume, and that 2026 will be a good year for the index despite its rocky start and the many threats facing it," he wrote Tuesday. "And we expect tech to return to the front of the pack before long."
That's down to earnings. With the economy still chugging along, there seems to be little that could meaningfully disrupt the rally-driving earnings growth of corporate America.
Moreover, that growth means that high valuations aren't "excessive, when considered properly," Matthews says. "If anything, we think they could rise further this year."
Tech's strong earnings, likewise, make him sanguine about the industry's billions of spending on AI development, especially as he believes the U.S. still has strong advantages over China in this regard.
Likewise he thinks worries about AI replacing other companies will blow over: "Such periods of 'creative destruction' aren't, in general, something to be concerned about when considering the market as a whole."
Add in the fact that the market has largely ignored all the geopolitical upheaval, and Matthews sees another year of gains for the S&P 500, ending 2026 at 8,000.
As for Coke and other staples, they could very well get pushed aside if tech steals the limelight once again. For those stocks, it was nice while it lasted.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 10, 2026 16:19 ET (21:19 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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