U.S. stocks opened lower on Friday, with prominent software stocks broadly declining. The latest Producer Price Index data significantly exceeded expectations, indicating that U.S. inflation remains persistent and heightening concerns about potential market volatility.
The Dow Jones Industrial Average fell by 415.72 points, or 0.84%, to 49,083.48. The Nasdaq Composite dropped 289.05 points, or 1.26%, to 22,589.33. The S&P 500 index declined by 56.05 points, or 0.81%, to 6,852.81. A report released on Friday showed that U.S. wholesale prices rose at a faster-than-expected pace in January, dampening hopes that inflation was continuing to ease. Of greater concern was the core PPI figure, which excludes food and energy prices. After excluding the volatile food and energy categories, the core Producer Price Index increased by a seasonally adjusted 0.8% month-over-month. This was higher than December's 0.6% increase and substantially surpassed the Dow Jones consensus forecast of 0.3%. The headline PPI, which includes all items, rose 0.5% compared to the previous month, also exceeding the predicted 0.3% and marking a 0.1 percentage point increase from the prior month. On an annual basis, core wholesale prices increased by 3.6%, while the headline index rose 2.9% year-over-year. Both figures remain well above the Federal Reserve's 2% inflation target, signaling that rising prices continue to be a headwind for the U.S. economy. Technology stocks faced renewed pressure on Friday, extending a weak trend for the month, with NVIDIA continuing to slide following its earnings report. In the previous trading session, NVIDIA closed down more than 5%, a move that surprised many investors. These investors maintain a bullish outlook on the chipmaker, citing its strong fourth-quarter results and an upcoming product cycle. Market participants attributed the stock decline to doubts about NVIDIA's deal with OpenAI, weak sentiment around AI-related trades, and concerns over the sustainability of high AI capital expenditures by hyperscalers. The favored AI chip company invested $30 billion in OpenAI's latest funding round, which totaled $110 billion. The stock price of Amazon—which invested $50 billion in the same round—also moved lower alongside NVIDIA. In previous bull markets, such announcements typically boosted related technology stocks. Prominent software stocks also incurred losses on Friday, capping off a poor performance for the month. Salesforce fell more than 3%, and Microsoft declined about 1%, weighing on Dow futures. Cybersecurity firm Zscaler saw its stock drop 9% after reporting second-quarter deferred revenue and billings that missed expectations. CoreWeave fell 11% due to disappointing guidance. Stocks in the financial sector and other market areas also pulled back amid concerns that AI poses a threat to the labor market and the broader economy. These worries were amplified after Block announced on Thursday that it was laying off over 4,000 employees, nearly half of its workforce. "Investors are slowing their pace of building positions due to elevated levels of uncertainty," said Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute. Samana remains confident that economic and corporate earnings growth will lead the S&P 500 to overcome short-term issues and break higher from current levels. Friday marks the final trading day of February, a volatile month during which software stocks were shaken by fears of AI disruption. As a result, the Nasdaq Composite is on track for a 2.5% decline, which would be its worst monthly performance since March of last year. The iShares Expanded Tech-Software Sector ETF has fallen 9% this month, bringing its year-to-date decline to 21%. The S&P 500 is poised for a 0.4% loss in February, while the Dow Jones is set to post a 1.2% gain.
