US stock markets weakened as they approached the close on Friday, resulting in overall weekly losses. Investors were processing a cooler-than-anticipated inflation reading, which has significant implications for future interest rate decisions.
The S&P 500 managed to land just above the flatline, while the Dow Jones Industrial Average inched up by 0.1%. On the other hand, the tech-heavy Nasdaq Composite experienced a decline of 0.2%. Throughout the week, both the Dow and S&P 500 noted losses exceeding 1%, and the Nasdaq saw a more substantial fall, dropping over 2%.
Newly released data from the Bureau of Labor Statistics indicated that inflation rose less than expected in January, with the Consumer Price Index reflecting a 0.2% increase from the previous month and a 2.4% increase year-over-year. This report is expected to influence the Federal Reserve’s already complex policy decisions, with traders beginning to favor potential interest rate cuts in June; many now predict a quarter-point reduction that month. While two cuts are anticipated by the end of 2026, a growing number of traders are leaning toward the possibility of additional reductions.
This market shift follows a day of intense selling driven by fears of AI disruption affecting traditional sectors such as real estate, logistics, and transportation. These sectors, typically regarded as safe investments compared to technology stocks, suffered as Wall Street grappled with AI-related uncertainties. Every member of the “Magnificent Seven” – the prominent tech giants – saw declines, contributing to the sharp weekly losses across major indices.
Investors are closely monitoring earnings as they attempt to navigate the AI landscape. While shares of Applied Materials surged due to a positive outlook reflecting strong AI demand, Pinterest’s stock plummeted after it reported disappointing revenue, raising concerns about AI’s impact on its platform.
In the earnings scene, Rivian’s shares jumped over 25% following an impressive fourth-quarter performance, with the electric vehicle manufacturer confirming that its R2 midsize model is on track for a pre-summer launch. Similarly, Moderna experienced a 10% rise in its stock after reporting quarterly revenue that surpassed expectations, driven by strong sales of its Covid vaccine.
As the market dynamics evolve and companies adapt to AI technologies, optimism remains that innovation will foster new growth opportunities in various sectors.