U.S. stocks rose in volatile trading on Friday as inflation showed signs of cooling, but a slide in technology stocks amid renewed fears of AI-induced disruption limited gains, putting the S&P 500 and the Dow Jones on track for their worst weekly losses since November.
Data on Friday showed US consumer prices rose less than expected in January, prompting traders to slightly raise the odds of a Federal Reserve rate cut in June to 69%, up from 63% previously.
“The key takeaway for both rates markets and equities is that the disinflation trend is continuing. It somewhat reinforces the idea that we are past the peak of inflation concerns,” said Michael Metcalfe, head of market strategy at State Street Markets.
“This paints a picture of a continued improving inflation outlook, which could see interest rates fall later this year.”
Stock markets have retreated from record levels as fears of AI-induced disruption fueled a sell-off in sectors from software and insurance to trucking companies, while stronger-than-expected jobs data in January cast doubt on the pace of monetary policy easing this year.
The Cboe volatility index, Wall Street’s fear gauge, hit a one-week high of 22.40 points before falling slightly.
At 11:55 a.m., the Dow Jones Industrial Average rose 222.36 points, or 0.45%, to 49,674.34, the S&P 500 gained 36.38 points, or 0.53%, to 6,869.14, and the Nasdaq Composite added 72.55 points, or 0.32%, to its gains. 22,669.69.
With earnings season now more than halfway through, AI investment has become a dominant theme for the “Magnificent Seven” companies, whose cumulative investments are expected to reach approximately $650 billion. Investors are now demanding real payouts as they continue to punish sectors they fear are coming under pressure from increasing competition.
“You’re discounting a lot of revenue streams that have yet to materialize. Investors are questioning whether they will actually happen and we’re not trading at cheap valuations,” said Brent Schutte, chief investment officer of Northwestern Mutual Wealth Management.
“That just raises the bar a little bit for investors to keep pushing the market higher.”
Big tech stocks weighed in, with Nvidia and Alphabet down 1.5% and 0.7%, respectively.
Healthcare stocks supported markets Friday, with Eli Lilly and UnitedHealth adding 0.8% and 1.2%, respectively. Moderna rose 8.9% after fourth-quarter sales exceeded expectations.
Shares of Applied Materials rose 9.3% after the chip manufacturing equipment company forecast second-quarter revenue and profit that topped Wall Street expectations.
Network equipment supplier Arista Networks gained 9.8% after forecasting full-year revenue above expectations.
White House trade adviser Peter Navarro said there was no basis for reports that the administration planned to cut tariffs on steel and aluminum.
Still, some steelmakers fell, with Nucor down 2.3% and Steel Dynamics down 3.2%.
Aluminum producers Alcoa and Century Aluminum fell 1.1% and 7.1% respectively.
Advancing issues outpaced declining issues by a 3.08-to-1 ratio on the NYSE, and by a 3.06-to-1 ratio on the Nasdaq.
The S&P 500 posted 28 new 52-week highs and five new lows, while the Nasdaq Composite posted 40 new highs and 108 new lows.
(Reporting by Twesha Dikshit, Purvi Agarwal and Medha Singh in Bengaluru; Editing by Shilpi Majumdar and Pooja Desai)
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