Tamer-Than-Expected Inflation Data May Lead To Rebound On Wall Street

The major U.S. index futures are currently pointing to a slightly higher open on Friday, with stocks likely to regain ground following the sell-off seen in the previous session.

The futures had been pointing to continued weakness on Wall Street but regained ground following the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of January.

The report showed consumer prices rose by slightly less than expected on a monthly basis, while the annual rate of growth slowed by more than anticipated.

The Labor Department said its consumer price index rose by 0.2 percent in January after climbing by 0.3 percent in December. Economists had expected prices to rise by another 0.3 percent.

The annual rate of growth by consumer prices slowed to 2.4 percent in January from 2.7 percent in December, coming in below estimates of 2.5 percent.

Meanwhile, the Labor Department said core consumer prices, which exclude food and energy prices, increased by 0.3 percent in January after rising by 0.2 percent in December, matching expectations.

The annual rate of growth by core consumer prices dipped to 2.5 percent in January from 2.6 percent in December, which was also in line with estimates.

The tamer-than-expected headline inflation data may lead to renewed optimism about the outlook for interest rates.

“This print strengthens the case that the Federal Reserve can maintain a gradual easing bias without fearing renewed inflation pressure,” said Daniela Hathorn, Senior Market Analyst at Capital.com.

She added, “Importantly, while the labor market remains resilient, today’s CPI reduces the risk that strong employment data forces the Fed into a hawkish rethink.”

After ending Wednesday’s choppy trading session modestly lower, stocks showed a more substantial move to the downside during trading on Thursday. The major averages once again failed to sustain an early upward move and pulled sharply as the day progressed.

The major averages saw further downside going into the end of the day, closing near their lows of the session. The Nasdaq plunged 469.32 points or 2.0 percent to 22,597.15, the S&P 500 tumbled 108.71 points or 1.6 percent to 6,832.76 and the Dow slumped 669.42 points or 1.3 percent to 49,451.98.

The sell-off on Wall Street was partly attributed to concerns about the impact of the artificial intelligence buildout on industries other than the tech sector.

Concerns about the impact AI could have on revenues and profit margins of financial, transportation and logistics and even commercial real estate companies generated considerable selling pressure.

Renewed weakness among tech stocks also weighed on Wall Street amid a steep drop by shares of Cisco Systems (CSCO).

Cisco plummeted by 12.3 percent after the networking giant reported better than expected fiscal second quarter results but provided disappointing guidance for the current quarter.

Partly reflecting the nosedive by Cisco, the NYSE Arca Networking Index tumbled by 3.0 percent on the day.

Gold stocks also saw substantial weakness amid a steep drop by the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 6.9 percent.

Significant weakness was also visible among transportation stocks due to the AI concerns, with the Dow Jones Transportation Index plunging by 4.0 percent.

Financial, steel and energy stocks also saw considerable weakness, while interest rate-sensitive telecom and utilities stocks bucked the downward trend amid a steep drop by treasury yields.

On the U.S. economic front, the Labor Department released a report showing first-time claims for U.S. unemployment benefits dipped by less than expected last week.

The report said initial jobless claims slipped to 227,000, a decrease of 5,000 from the previous week’s revised level of 232,000.

Economists had expected jobless claims to fall to 220,000 from the 231,000 originally reported for the previous week.

The National Association of Realtors also released a report showing existing home sales pulled back by much more than expected in the month of January.

Commodity, Currency Markets

Crude oil futures are inching up $0.15 to $62.99 a barrel after plunging $1.79 to $62.84 a barrel on Thursday. Meanwhile, after tumbling $150.10 to $4,948.40 ounce in the previous session, gold futures are jumping $60.90 to $5,009.30 an ounce.

On the currency front, the U.S. dollar is trading at 153.15 yen versus the 152.73 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1864 compared to yesterday’s $1.1869.

Asia

Asian stocks followed Wall Street lower on Friday as investors fretted over the impact of artificial intelligence on various sectors and looked to U.S. CPI data later in the day for clues on when the Federal Reserve might cut rates.

Forecasters expect inflation to have decelerated in January, with core prices rising 2.5 percent year-over-year, the slowest since 2021.

This week’s stronger-than-expected U.S. jobs data sharply reduced hopes of near-term Federal Reserve rate cuts.

In trade developments, the United States and Taiwan have finalized a trade deal to reduce tariffs, boost market access for American products in Asia and direct billions of dollars into U.S. energy and technology projects.

The dollar index was steady in Asian trading, helping gold prices bounce back after tumbling 3 percent to almost a one-week low in the previous session. Oil prices were on track for a second weekly decline on receding concerns of a U.S.-Iran conflict and supply glut fears.

China’s Shanghai Composite Index ended tumbled 1.3 percent to 4,082.07 ahead of a week-long holiday. Hong Kong’s Hang Seng Index dove 1.7 percent to 26,567.12, dragged down by technology stocks.

Japanese markets ended lower as SoftBank Group shares plummeted on AI-related concerns. Shares of the technology group plunged 8.9 percent despite the company reporting a nearly five-fold jump in its net profit in the nine months through December.

The Nikkei 225 Index slumped 1.2 percent to 56,941.97, while the broader Topix index closed 1.6 percent lower at 3,818.85.

Seoul stocks fluctuated before ending modestly lower. The Kospi dipped 0.3 percent to 5,507.01, snapping a four-day winning streak ahead of next week’s extended market holiday for the Lunar New Year.

Australian markets joined the global sell-off on concerns over AI disruptions. The benchmark S&P/ASX 200 Index tumbled 1.4 percent to 8,917.60, while the broader All Ordinaries Index settled 1.54 percent lower at 9,138.80.

Tech shares came under heavy selling pressure, with WiseTech Global plummeting 10.4 percent and Xero losing 4.5 percent on fears that artificial intelligence will disrupt established business models.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index plunged 2.5 percent to close at 13,198.18, hitting an over four-month low as strong manufacturing PMI data tempered investor expectations of aggressive near-term RBNZ easing.

Europe

European stocks were mixed on Friday despite a sell-off on Wall Street overnight amid growing concerns about artificial intelligence disruptions.

While the French CAC 40 Index is down by 0.3 percent, the U.K.’s FTSE 100 Index is up by 0.1 percent and the German DAX Index is up by 0.3 percent.

Beauty major L’Oreal has shown a substantial move to the downside after its fourth quarter sales missed forecasts.

Norwegian aluminum producer Norsk Hydro has also plunged after its fourth-quarter revenue came in below expectations.

On the other hand, iron ore producer Vale has moved notably higher after its fourth-quarter core profit beat forecasts.

Capgemini shares have also rallied. The French IT services group reported full-year revenue that beat its own target.

Aerospace group Safran has also soared after it forecast increased revenue and earnings for 2026.

U.S. Economic News

The Labor Department released a highly anticipated report on Friday showing consumer prices in the U.S. increased by slightly less than expected in the month of January.

The report said the consumer price index rose by 0.2 percent in January after climbing by 0.3 percent in December. Economists had expected prices to rise by another 0.3 percent.

The annual rate of growth by consumer prices slowed to 2.4 percent in January from 2.7 percent in December, below estimates of 2.5 percent.

Meanwhile, the Labor Department said core consumer prices, which exclude food and energy prices, increased by 0.3 percent in January after rising by 0.2 percent in December, matching expectations.

The annual rate of growth by core consumer prices dipped to 2.5 percent in January from 2.6 percent in December, which was also in line with estimates.