U.S. Stocks Extending Yesterday’s Pullback Amid Inflation, AI Concerns

Following the pullback seen in the previous session, stocks are seeing continued weakness during trading on Friday. The major averages have all moved to the downside, with the Dow hitting its lowest intraday level in almost a month.

Currently, the major averages are well off their lows of the session but remain firmly negative. The Dow is down 565.35 points or 1.1 percent at 48,933.85, the Nasdaq is down 163.05 points or 0.7 percent at 22,715.33 and the S&P 500 is down 38.61 points or 0.6 percent at 6,870.25.

The continued weakness on Wall Street comes following the release of a Labor Department report showing producer prices in the U.S. increased by more than expected in the month of January.

The report said the Labor Department’s producer price index for final demand climbed by 0.5 percent in January after rising by a downwardly revised 0.4 percent in December.

Economists had expected producer prices to rise by 0.3 percent compared to the 0.5 percent increase originally reported for the previous month.

The Labor Department also said the annual rate of producer price growth edged down to 2.9 percent in January from 3.0 percent in December. Economists had expected yearly growth to slow to 2.8 percent.

“For the past month the market has been worried about AI disruption and its impact on the labor market, so inflation hasn’t been top of mind,” said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.

He continued, “But this morning’s inflation readings could give the Fed another reason to be more patient with rate cuts and wait until the second half of the year before making any changes.”

Lingering concerns regarding AI-related layoffs and disruptions may also weigh on Wall Street after Block (XYZ) said it is cutting its workforce by nearly half.

Block CFO Amrita Ahuja said the payments company sees an “opportunity to move faster with smaller, highly talented teams using AI to automate more work.”

Sector News

Banking stocks have shown a substantial move to the downside on the day, dragging the KBW Bank Index down by 4.4 percent.

Significant weakness is also visible among airline stocks, as reflected by the 4.3 percent nosedive by the NYSE Arca Airline Index.

Brokerage, software and semiconductor stocks are also seeing considerable weakness, while pharmaceutical, gold and retail stocks have shown notable moves to the upside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index edged up by 0.2 percent, while China’s Shanghai Composite Index rose by 0.4 percent and Hong Kong’s Hang Seng Index jumped by 1 percent.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the U.K.’s FTSE 100 Index is up by 0.6 percent, the German DAX Index is just below the unchanged line and the French CAC 40 Index is down by 0.4 percent.

In the bond market, treasuries are extending the upward move seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.8 basis points at 3.979 percent.

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