US stocks dragged lower as investors digest optimistic inflation data

As investors ignored Intel’s bleak outlook and considered a crucial inflation number that was thought to have an impact on when interest rates will be slashed, stocks fluctuated on Friday afternoon.

Despite closing at a new high on Thursday, the S&P 500 lost 0.1%, even if it is expected to finish trading with weekly gains. The tech-heavy Nasdaq Composite fell 0.3%, while the Dow Jones Industrial Average rose 0.08%, or roughly 30 points.

Following Intel’s first quarter projection that fell well short of Wall Street expectations, which slightly dashed the AI-fueled optimism that has propelled equities to record highs, techs trailed the other indices. During afternoon trade, Intel’s stock fell 10%, while competitors AMD and Nvidia also saw a little decline.

Nonetheless, investors were given a positive impression of inflation when the PCE index for December was released. The Fed’s preferred measure of inflation, “core” PCE, dropped below 3% annually, marking the worst growth rate since March 2021.

This figure, together with an earlier estimate of the US GDP for the fourth quarter that was hotter than anticipated, may contribute to the idea that the US economy is set for a “soft landing.”

Next week, central bankers will gather for their annual policy meeting. They are largely anticipated to maintain stable interest rates. However, the recent run of strong economic statistics will probably force them to start lowering rates later this year—possibly even in March. Despite this, recent data revealed faster-than-expected economic growth, which presents a challenging balancing act for Fed members. Inflation may spike back up if an easing cycle is started too soon.

Simultaneously, investors analyzed Friday’s earnings report to gain additional understanding of the state of the economy and corporate America. A standout was Colgate-Palmolive (CL), which reported impressive fourth-quarter results that were ascribed to its consumer markets in Latin America.

Visa provided a modest revenue growth estimate, and several analysts noted that the US payments volume growth had slowed down going into the new year, which would portend an impending recession in the economy.