U.S. stocks ended mixed on Friday after seesawing through most of the session, while Treasury yields slid after data showed a moderation in consumer inflation in January.
The benchmark S&P 500 index closed flat at 6,835.08 points, the blue-chip Dow Jones Industrial Average ticked up 0.1% to settle at 49,500.93 points, and the tech-heavy NASDAQ Composite fell 0.2% to conclude at 22,546.67 points.
For the week, the S&P shed 1.4%, the Dow fell 1.2%, and the Nasdaq was down 2.1%.
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January CPI cools According to the U.S. Bureau of Labor Statistics, headline consumer price index (CPI) rose 2.4% Y/Y in January, below the consensus of 2.5% and decelerating from December’s 2.7% reading. On a M/M basis, headline CPI rose 0.2%, also below the estimate of 0.3%.
Core CPI came in-line on both a M/M and Y/Y basis.
The soft headline print comes just days after a blowout January nonfarm payrolls report. The CME Fedwatch tool showed traders slightly upping their bets that the Fed would ease interest rates this year.
"Inflation came in slightly softer than expected in January’s delayed report, with headline inflation coming in at 2.4%, and core coming in at 2.5%," Phil Blancato, chief market strategist at Osiac, told Investing.com.
"The softer inflation has given renewed credit to the idea of the Fed cutting rates more, or sooner than expected, as inflation has continued to creep towards the Fed’s 2% target. Interest sensitive sectors and asset classes like small caps, and real estate/utility stocks should see a bounce on the back of lower inflation," he added.
Meanwhile, U.S. Treasury yields slipped as bonds were snapped up after the CPI data. The benchmark United States 10-Year yield was down 6 basis points to 4.049%, while the shorter-end, more rate-sensitive United States 2-Year yield also slipped 6 basis points to 3.410%.
Tech in focus, Applied Materials surges The tech sector remains in the spotlight, after fresh concerns around possible disruptions from artificial intelligence dominated sentiment on Thursday, sending the main averages on Wall Street tumbling.
The Nasdaq lost a hefty 2%, while the S&P dropped nearly 1.6%, and the Dow shed almost 670 points, or 1.3%.
"Although much has been made about whether or not the Fed can keep cutting interest rates this year, the markets seem to care much more about the possibilities of AI disruption across a broad swath of industries right now," Chris Zaccarelli, chief investment officer at Northlight Asset Management, said.
"As long as CPI remains in check – which so far it has – then the rates discussion will revert back to the labor market, and under the current economic conditions the Fed is likely to proceed cautiously lowering rates a couple of times later this year," he said.
"The market is going through some volatility right now, which isn’t that surprising, but the bull market is likely to remain intact as long as the economy continues to grow, the labor market holds up, and inflation measures continue to fall. All of these conditions are in place and there haven’t been any new datapoints this month to contradict that," Zaccarelli added.
