US Stocks Fall as AI Worries and Mixed Economic Data Weigh on Markets
U.S. equity markets fell on Thursday, with the S&P 500 sliding 1.57% and the Nasdaq dropping over 2% amid concerns about AI-sector valuations. While a key consumer inflation report came in lighter than expected, a robust jobs report showing 130,000 new jobs in January complicated the outlook for potential Federal Reserve rate cuts.
- The January Consumer Price Index (CPI) indicated that annual inflation in the U.S. slowed to 2.4%, a figure lower than the 2.5% that economists had anticipated. On a monthly basis, the CPI saw a modest increase of 0.2%. - Core CPI, which excludes the more volatile food and energy sectors, rose 0.3% from the previous month and showed a 2.5% increase over the last year. This annual core inflation rate is the lowest recorded since March of 2021. - The strong jobs report has led to a shift in expectations for future Federal Reserve action, with traders now seeing less than a 5% chance of an interest rate cut in March. Some financial institutions, such as Citi, have adjusted their forecasts, now predicting the first rate cut to occur in May rather than March. - Despite a better-than-expected earnings report, Cisco Systems saw its stock sink by 12.3% due to investor concerns about its future profitability. Similarly, AppLovin's stock plunged 19.7% amidst worries that AI could negatively impact its business model. - The sell-off in AI-related stocks has extended beyond the tech sector, affecting commercial property services firms as well. Companies like CBRE, Jones Lang LaSalle, and Cushman & Wakefield experienced significant drops in their stock values. - Investor sentiment is showing signs of caution, with the AAII Investor Sentiment Survey indicating a nearly even split between bullish (38.5%) and bearish (38.1%) outlooks for the next six months. Additionally, a February survey from the S&P Global Investment Manager Index revealed that investor risk appetite has fallen to a four-month low.
