Stocks finished the week on a mixed note as Wall Street digested the latest inflation data and ongoing concerns about the impact of artificial intelligence (AI) on the business landscape. While consumer prices cooled more than expected in January, easing some pressure on the Federal Reserve, the technology-heavy Nasdaq composite index still posted its fifth consecutive weekly decline - its longest such streak since 2022.
A Cooling Inflation Pace, but Pockets of Concern Remain
The U.S. Consumer Price Index (CPI) rose 2.4% in January from a year earlier, marking an eight-month low and coming in slightly below the 2.5% forecast by economists. This slowdown was driven by falling gas prices and moderating costs for used cars and housing. However, the core CPI, which strips out volatile food and energy costs, remained elevated at 2.5% - a sign that underlying inflationary pressures have not fully abated.
"This is one of those tough weeks where the data looks good on paper, but households are still feeling the pinch of higher prices," said Tyler Schipper, an associate professor of economics at the University of St. Thomas. "Even a good inflation report from the perspective of economists is higher prices, and that's not going to sit well with a lot of people."
AI Jitters Continue to Weigh on Tech Stocks
Concerns about the disruptive potential of AI technologies continued to weigh on the tech-heavy Nasdaq, which fell 2.1% for the week - its worst performance since November. Investors have been grappling with the implications of rapid advancements in AI, which some fear could automate countless jobs and upend entire industries.
As Reuters reports, the Nasdaq's five-week losing streak is its longest since a seven-week slide that ended in May 2022. And while the S&P 500 and Dow Jones Industrial Average managed to eke out small gains on Friday, the lingering AI concerns have left the market on edge.
A Delicate Balancing Act for the Fed
The mixed signals from the latest economic data present a challenging situation for the Federal Reserve as it seeks to navigate the path forward for monetary policy. On one hand, the slowdown in inflation could provide the central bank with the flexibility to cut interest rates later this year without risking a resurgence in price pressures. But the still-robust labor market, as evidenced by the unexpectedly strong hiring reported earlier this week, complicates the picture.
"Given the Fed's dual mandate of price stability and maximum employment, we believe inflationary concerns could play a larger role than previously expected in determining the path of monetary policy this year," said Josh Jamner, senior investment strategy analyst at Clearbridge Investments.
As the CNN Business report notes, the January inflation data could still be affected by the disruptions from the historically long federal government shutdown last fall, adding another layer of uncertainty for policymakers to navigate.