On Friday, U.S. stocks faced pressure due to a hotter-than-expected update on inflation, with the S&P 500 down 0.3%, the Dow Jones Industrial Average down 0.2%, and the Nasdaq composite down 0.7% in morning trading. The report on wholesale inflation in January surpassed economists’ expectations, following a similar trend earlier in the week with consumer living costs. This data dampened hopes for Federal Reserve interest rate cuts in March or May, causing Treasury yields to rise. Despite the recalibrated expectations, critics argue that previous forecasts for rate cuts were overly optimistic. The Federal Reserve is still expected to cut its main interest rate, albeit at a slower pace than previously anticipated.
Meanwhile, hopes remain high for a resilient economy, supported by a preliminary report indicating rising consumer sentiment. However, expectations for inflation in the next 12 months have increased slightly, posing a potential challenge. Despite these uncertainties, companies like Applied Materials and Coinbase Global reported stronger-than-expected profits, driven by demand for semiconductor chips and increased cryptocurrency transactions.
Conversely, Digital Realty saw a decline in its stock following weaker-than-expected results. Overseas, European and Asian markets saw gains, with Japan’s Nikkei 225 approaching its record high despite economic challenges.
