Stocks took a hit on Friday as new data showed that wholesale inflation is rising faster than expected. The Dow Jones Industrial Average fell by 715 points, a drop of 1.5%. The S&P 500 lost 1.1%, while the Nasdaq Composite dropped 1.4%.
The producer price index (PPI) for January increased by 0.5%, which was higher than the anticipated 0.3%. Worryingly, the core PPI, which excludes food and energy, rose by 0.8%. Economists were expecting only a 0.3% increase. This data adds to worries about persistent inflation and its impact on the economy.
Tech stocks have been struggling lately. For example, Nvidia’s shares dropped 2% after a surprise 5% decline the previous day. Many investors were optimistic about Nvidia due to its strong fourth-quarter results, but concerns linger regarding its partnership with OpenAI and whether AI spending can be maintained.
Other tech giants also faced losses. Salesforce fell over 4%, and Microsoft’s shares dropped about 2%. Cybersecurity firm Zscaler saw a significant decline of 11% due to lower-than-expected revenue. CoreWeave’s stock faltered by 16% following disappointing guidance.
Broader market sentiments were shaken as fears grew over AI’s potential to disrupt jobs and the economy. The layoffs announced by Block, cutting nearly half its workforce, added to these concerns.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, summed it up well: “People have been selling first and asking questions later.” He noted that inflation data complicates the already sensitive economic situation, especially with the disruptive changes AI might bring.
February is wrapping up as a tough month for stocks, especially in the tech sector. The Nasdaq is on track for a decline over 3%, marking its worst monthly performance since March of last year. The iShares Expanded Tech-Software ETF is down 10% this month, reflecting broader challenges in the industry.
In the big picture, understanding these fluctuations is crucial. A recent survey showed that 67% of investors are concerned about rising inflation and its implications. Keeping an eye on economic indicators like the PPI will be vital as markets adjust to these new realities.
For more on the impact of inflation on the economy, see the report from the Bureau of Labor Statistics here.
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