Equities Fell on AI Fears Last Week

Investors experienced another turbulent week for U.S. stocks last week, although a fairly mild inflation report brought the market some relief on Friday. The S&P 500 had its worst week since November, and the Global Dow was the only major market index that didn’t end up in the red. Fears about AI disruption spread to more industries seen as potentially vulnerable. Investors fled to defensive sectors such as Utilities, Materials and Real Estate, which all posted strong weekly gains, leaving the Financial Services, Communication Services and Information Technology sectors with sharp losses. Safe haven seekers pushed the yield on 10-year Treasuries, which falls when prices rise, down to its lowest level since November 28.

CPI Cooled in January, Led by Lower Gasoline Prices

The Consumer Price Index advanced 0.2% in January and 2.4% for the year, a significant slowdown from the 2.7% advance for the 12 months ended in December. Declining prices for gasoline (-7.5%) and used cars (-2.0%) helped bring down the overall inflation rate for the year. Prices less food and energy increased 0.3% in January and 2.5% since January 2025. Shelter prices cooled in January, rising 0.2% after a 0.4% rise in December. In January, food prices rose 0.2%, while energy prices fell 1.5%. Over the last 12 months, prices for food increased 2.9%, while energy prices decreased 0.1%.

Eye on the Week Ahead

The release of economic reports remains somewhat tenuous and unpredictable, as agencies continue to play catch-up following the October government shutdown. In any case, the first report on fourth-quarter gross domestic product is on tap for release this week. The economy expanded at a 4.4% annualized rate in the third quarter.