Wall Street Steadies as Cooling Inflation Data Helps Calm Volatile Stocks/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. stocks steadied after fresh data showed inflation slowed more than expected. The report eased pressure following an AI-driven sell-off that rattled markets. Treasury yields fell as investors bet the Federal Reserve could resume rate cuts later this year.
Inflation Eases, Wall Street Stabilizes After AI Sell-Off Quick Looks
- S&P 500 slipped 0.1% after recent volatility.
- Dow Jones Industrial Average fell 76 points.
- Nasdaq Composite declined 0.3%.
- Inflation slowed to 2.4% year-over-year in January.
- Treasury yields dropped following the inflation report.
- AI disruption fears continue to spark sharp stock swings.
Deep Look: Wall Street Steadies as Cooling Inflation Data Helps Calm Volatile Stocks
Wall Street found firmer footing Friday after an encouraging inflation report helped soothe investors following a wave of volatility tied to artificial intelligence concerns.
The S&P 500 dipped just 0.1% in morning trading, a marked improvement from the sharp losses seen a day earlier — one of its steepest declines since Thanksgiving. While the benchmark index edged lower, most individual stocks within it were climbing. The Dow Jones Industrial Average fell 76 points, or 0.2%, while the Nasdaq composite slipped 0.3%.
The relatively steady performance came after new data showed inflation cooled more than economists expected last month, offering relief to investors worried about persistent price pressures and the Federal Reserve’s next moves.
Inflation Shows Further Cooling
According to the latest government report, U.S. consumers paid 2.4% more overall for goods and services in January compared with a year earlier. That marks a slowdown from December’s 2.7% annual rate.
While still above the Federal Reserve’s long-term 2% target, the figure came in better than anticipated. An underlying measure of inflation — which excludes volatile food and energy prices and is closely watched by economists — slowed to its lowest level in nearly five years.
For investors, the data suggested inflation pressures may be gradually easing rather than reigniting.
“It’s still too high, but only for now, not forever,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management.
What It Means for the Federal Reserve
Slower inflation could provide the Federal Reserve more flexibility in determining its interest-rate path. The Fed has paused its rate cuts in recent months after lowering borrowing costs previously, but many economists expect it to resume reductions later this year if inflation continues to cool.
Lower interest rates would likely stimulate economic activity, making borrowing cheaper for consumers and businesses. They also tend to support stock prices by improving corporate profit outlooks and making equities more attractive relative to bonds.
However, rate cuts come with risks. If implemented too quickly, they could reignite inflation by boosting demand too aggressively.
In addition to easing inflation, recent data showed the job market strengthened more than expected last month, reinforcing the sense that the U.S. economy may be in a healthier position than it was at the end of 2025.
Treasury Yields Drop
Bond markets reacted positively to the inflation news. The yield on the 10-year Treasury note slipped to 4.06% from 4.09% late Thursday. The two-year Treasury yield — which more closely reflects expectations for Federal Reserve policy — fell more sharply, dropping to 3.41% from 3.47%.
Lower yields signal increased investor confidence that inflation is trending in the right direction and that rate cuts may be back on the table.
AI Fears Still Linger
Even as inflation news brought calm, concerns about artificial intelligence disrupting business models continue to create sharp swings in certain stocks.
On Thursday, investors aggressively sold shares of companies perceived as vulnerable to AI-driven competition. The reaction was swift enough that analysts described it as a “shoot first, ask questions later” mentality.
AppLovin, for instance, plunged nearly 20% Thursday despite reporting stronger-than-expected profits. Investors worried AI-powered rivals could erode its competitive edge. On Friday, shares rebounded modestly, rising 1.3%.
Trucking and freight companies also suffered heavy losses after a smaller firm, Algorhythm Holdings, claimed its AI platform could scale freight volumes dramatically without adding staff. C.H. Robinson Worldwide, which had dropped 14.5% Thursday, recovered 1.7% in early Friday trading.
The rapid repricing underscores how investors are reassessing entire industries based on perceived vulnerability to AI innovation.
Earnings Winners and Losers
Not all companies were weighed down by AI fears.
Applied Materials jumped 10.3% after posting stronger-than-expected quarterly profits. The semiconductor equipment maker benefited from increased investment in AI-related chip manufacturing. CEO Gary Dickerson credited accelerating AI computing demand for driving industry spending.
Moderna climbed 7.5% after reporting earnings that topped analyst expectations.
On the downside, DraftKings fell 10.7% despite beating profit forecasts. Investors were disappointed by revenue guidance that came in below expectations for the year ahead.
Several major technology stocks also weighed on the broader market. Nvidia dropped 2.1%, and because of its massive market capitalization, it exerted the heaviest downward pull on the S&P 500.
Global Markets Mixed
Overseas markets showed mixed results. In Asia, Hong Kong’s Hang Seng index fell 1.7%, while Japan’s Nikkei 225 declined 1.2%. European markets were more varied, reflecting regional economic differences and global investor caution.
The Bigger Picture
For now, the encouraging inflation data has provided a stabilizing force after recent turbulence driven by AI-related disruption fears.
While markets remain sensitive to both economic data and technological shifts, Friday’s steadier trading suggests investors may be regaining some confidence that inflation is trending lower and that the Federal Reserve could have room to support the economy later this year.
Still, volatility tied to AI innovation, earnings outlooks and global economic conditions is unlikely to fade anytime soon.
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