Stocks sank on Friday as January’s producer price index surprised well above expectations and concerns about artificial intelligence and corporate layoffs intensified market stress. The Dow Jones Industrial Average fell 737 points (about 1.5%), the S&P 500 dropped 0.8% and the Nasdaq lost 1%, leaving all three major benchmarks lower for February. The PPI headline rose 0.5% month-over-month while core PPI — which strips out food and energy — jumped 0.8%, both readings well above economists’ forecasts. Additional shocks from big layoffs at Block and strains in the private credit sector added to selling pressure across cyclical and technology-linked names.
Key Takeaways
- Dow declined 737 points, or roughly 1.5%, on Friday; S&P 500 and Nasdaq fell 0.8% and 1.0% respectively.
- January PPI rose 0.5% month-over-month versus a Dow Jones consensus of 0.3%; core PPI was +0.8% vs. 0.3% expected.
- Block announced layoffs of more than 4,000 employees (about half its workforce), intensifying AI-related growth and cost concerns.
- Private-credit–linked stocks eked lower after Market Financial Solutions’ collapse; Apollo and Jefferies slid about 8% and 10%, respectively; Blue Owl dropped ~6%.
- Notable software and AI‑adjacent names recorded sharp moves: Zscaler -15% (missed deferred revenue/billings); CoreWeave -18% on weak guidance; Nvidia extended a post-earnings pullback with a 2% slide.
- Market volatility rose: the VIX moved back above 20, and the 10-year Treasury yield fell below 4% before the PPI but traded near 3.98% ahead of the print.
- February has been a rough month: Nasdaq is on pace for a >3% decline, S&P for a >1% drop and the Dow for roughly a 0.3% decrease.
Background
Markets entered Friday already jittery over the macro mix and a wave of AI-driven reappraisals of corporate spending. Large cloud customers and hyperscalers have announced sizable AI capital programs in recent quarters, prompting analysts to question whether elevated spending will be sustained and how quickly it will translate into revenue for chipmakers and software vendors. At the same time, pockets of stress in private-credit markets — spotlighted by the collapse of a UK mortgage provider, Market Financial Solutions — have raised concerns about liquidity and asset valuation in credit-focused public companies.
Inflation dynamics are complicating the Federal Reserve’s calculus. While headline consumer inflation has moderated at times, producer-level inflation can signal pressures upstream that eventually reach consumers; a stronger-than-expected PPI print increases the chance the Fed keeps policy tighter for longer. Labor-market data are adding to the uncertainty: job growth surprised to the upside in the prior month, but layoffs — which Challenger, Gray & Christmas reported were at their highest January total since the global financial crisis — suggest unevenness beneath the surface.
Main Event
Trading on Friday turned broadly negative after the Bureau of Labor Statistics’ PPI release. Investors sold cyclically sensitive financials and technology exposure as they reassessed company margins and earnings power under a regime of stickier wholesale inflation. Financial firms with ties to private-credit strategies bore notable losses, reflecting concerns that credit-market strains could translate into writedowns or reduced deal flow for asset managers and lenders.
Investor attention also focused on high-profile corporate moves that underscore structural shifts. Block’s announcement that it would reduce headcount by roughly half — more than 4,000 roles — amplified worries about rapid technological change and the human cost of strategic pivots toward AI and automation. Software and infrastructure vendors that had rallied earlier in the year were hit as several firms reported weaker-than-expected billings or guidance.
Chipmaker Nvidia, which posted blowout results earlier in the quarter, extended a modest post‑earnings slide, reflecting investor doubts over deal specifics with OpenAI and whether hyperscaler AI capex will remain elevated. The pullback in marquee AI‑exposed names weighed on sentiment, even as some defensive and consumer names reported relative resilience; for example, Monster Beverage posted better-than-expected Q4 results, prompting analysts to raise targets and pushing the stock higher.
Analysis & Implications
The overshot PPI report raises the probability that the Fed will delay rate cuts it might otherwise have considered later this year. Higher wholesale inflation suggests companies are encountering cost pressures they may either absorb — squeezing margins — or pass on to consumers, preserving margins but risking lower demand. Either pathway complicates revenue and profit forecasts for cyclical companies and those with long sales cycles.
AI remains a bifurcating force in markets. Firms that capture durable productivity gains or differentiated cloud-scale offerings may benefit over time, but market participants are increasingly debating the timing and magnitude of such benefits. The combination of aggressive upfront capex for AI infrastructure and uncertain monetization timelines has created a valuation disconnect for some software and chip stocks, producing sharper day-to-day volatility when macro or corporate news disappoints.
Stress in private credit and specialty finance firms introduces a separate contagion risk. If asset managers or lenders that rely on short-term funding or mark-to-market liquidity face pressure, that could tighten credit availability for leveraged borrowers and slow dealmaking — a headwind for banks, asset managers and the leveraged loan market. Global flows complicate the U.S. picture: a weakening dollar and stronger foreign returns have already drawn capital abroad, a factor UBS cited when trimming its view on U.S. equities.
Comparison & Data
| Index | February YTD Trend | Approx. Feb Change |
|---|---|---|
| Dow Jones Industrial Average | Mixed; cyclical weakness | ~ -0.3% |
| S&P 500 | Broad decline amid tech softness | ~ -1.0% |
| Nasdaq Composite | Tech-led selloff | > -3.0% |
Those monthly patterns reflect concentrated weakness among software and AI-exposed names: the iShares Expanded Tech-Software ETF (IGV) is down about 10% for the month and roughly 23% year-to-date. By contrast, select consumer and staples names — and some dividend-oriented utilities — have held up better, contributing to the relatively muted Dow move versus the Nasdaq.
Reactions & Quotes
Market strategists framed the PPI surprise as a complicating factor for investors already wrestling with AI and credit concerns, and company leaders described the hard choices they are making.
“Inflation isn’t solved yet,”
Stephen Kolano, Chief Investment Officer, Integrated Partners
Kopano’s comment highlighted the policy conundrum: whether the Fed should cut rates to spur growth or remain on hold to keep inflation in check. The remark followed his observation that services-driven inflation and potential tariff pass-throughs may be sustaining price pressures.
“We’re reducing Block by nearly half, from over 10,000 people to just under 6,000,”
Jack Dorsey, Co‑founder & CEO, Block (company letter)
Dorsey’s announcement underscored how some tech firms are reshaping costs amid strategic shifts toward high‑investment areas such as AI and fintech platform consolidation.
“We see asymmetric structural downside risks to the dollar,”
Andrew Garthwaite, Head of Global Equity Strategy, UBS
UBS’s stance fed into discussions about international allocation: a weaker dollar has already benefited non-U.S. equities this year, and currency moves could further influence U.S. equity performance if the trend continues.
Unconfirmed
- Whether hyperscalers will sustain the current pace of AI capital expenditures is unknown and depends on near-term ROI and macro conditions.
- The extent to which Market Financial Solutions’ collapse will cause a broader, material hit to U.S. private-credit firms remains uncertain and requires more data.
- Attribution of individual stock moves (for example, Nvidia’s slide) to a single factor such as the OpenAI deal is market interpretation rather than a confirmed causal link.
Bottom Line
Friday’s session was a reminder that markets remain vulnerable to a mix of sticky inflation readings, structural shifts from AI, and episodic credit stresses. Policymakers face a delicate balancing act: premature rate cuts could fan inflation, while prolonged tightness risks slowing growth and exposing fragile corporate credit positions.
Near term, investors will likely watch incoming inflation prints, earnings-related guidance (especially from AI‑exposed vendors and cloud customers), and any further signs of credit spillovers closely. For many market participants, the lesson is that selective positioning, stress-testing scenarios and attention to liquidity remain paramount as the macro‑tech interplay evolves.