Lead
U.S. stock futures fell Friday after government data showed January wholesale prices rose more than economists expected, intensifying already-volatile markets. The Dow lost 620 points (about 1.3%), the S&P 500 fell 0.7% and the Nasdaq slipped 0.9% on the session. The report — a 0.5% monthly gain in the producer price index and a 0.8% increase excluding food and energy — added to investor concern about sticky inflation even as AI-related disruptions and large corporate layoffs rattled sentiment. Together, the readings put pressure on an index set to finish February in negative territory.
Key Takeaways
- January PPI rose 0.5% month-over-month; core PPI (ex-food & energy) jumped 0.8%, versus Dow Jones economists’ 0.3% expectations for both measures.
- The Dow slid about 620 points (1.3%), the S&P 500 fell 0.7% and the Nasdaq declined 0.9% on Friday.
- The Nasdaq is on pace for a February decline of more than 3%; the S&P 500 and Dow are set for roughly a 1% and 0.3% monthly drop, respectively.
- Sector pain: software and cyclical names led losses — Salesforce fell >3%, Microsoft dropped >1%, Zscaler plunged ~11%, CoreWeave slid ~16%.
- Nvidia extended a post-earnings pullback, down ~2% on Friday after a >5% drop the prior session amid questions about AI capex sustainability.
- Block said it will reduce headcount by roughly half, cutting over 4,000 roles, a move that hit financial and fintech stocks.
- Volatility rose: the CBOE VIX climbed above 20 to around 21.12 while the 10-year Treasury yield traded just below 4% at about 3.981% ahead of the PPI release.
Background
Inflation readings have driven market positioning since the Fed began tapering emergency stimulus two years ago; traders now parse each macro release for signs that the central bank will delay rate cuts. The producer price index — a wholesale inflation gauge — is closely watched because it can presage changes in consumer inflation and influence the Federal Reserve’s policy timetable.
At the same time, the market has been contending with structural worries about AI’s uneven impact across industries. Big-cap chip and software names that had led gains this year are trading on a mix of stretched valuations and questions about whether hyperscale cloud and AI capital expenditures will grow as rapidly as investors hope.
Those dynamics intersect with episodic corporate developments: large layoffs and deal activity can amplify risk-off moves when macro data disappoints. This month, multiple headline events — including major staffing cuts at fintech firms and shifts in media M&A — have compounded volatility.
Main Event
Friday’s wholesale inflation release surprised to the upside. January’s headline PPI rose 0.5% month-over-month, above the 0.3% consensus, while core PPI climbed 0.8% versus an expected 0.3%. The hotter prints immediately raised questions about the Fed’s path and whether rate cuts may be pushed further into the future.
Equity markets reacted quickly: the Dow tumbled roughly 620 points (1.3%) by the close, with the tech-led Nasdaq and the broader S&P 500 also ending lower. Traders cited a combination of the PPI shock, profit-taking in AI trades and sector-specific disappointments — notably software companies that missed guidance or bookings.
Block’s announcement that it will reduce its workforce by about half — trimming more than 4,000 roles as it reorganizes — triggered sharp moves in fintech and payments stocks. Meanwhile, Netflix’s decision to step back from matching an increased Paramount Skydance bid for Warner Bros. Discovery and OpenAI’s large funding round added to headline noise that investors are weighing alongside macro data.
Fixed income and volatility markets reflected the nervous tone: the 10-year Treasury yield dipped below the 4% mark to roughly 3.981% as investors recalibrated risk, and the VIX climbed above 20 to around 21.12, signaling elevated hedge demand.
Analysis & Implications
Higher-than-expected wholesale inflation complicates the case for early Fed easing. If producer costs remain elevated, pass-through to consumer prices could slow the timing or scale of rate cuts the market has priced in. That would keep real borrowing costs higher for longer, weighing on equity valuations — particularly for growth stocks that rely on discounted future earnings.
AI optimism has been a major bullish driver this cycle, but the recent stretch of misses in software billings and cautious guidance from AI suppliers underscores that revenue trajectories will matter. Investors are increasingly differentiating between companies that can monetize AI investments quickly and those whose revenue upside is more speculative.
The dollar outlook also matters. UBS flagged downside risk to the greenback and expects the euro to strengthen; a weaker dollar historically shifts global capital toward foreign equities and can materially affect U.S. equity performance in unhedged terms. If the dollar continues to soften, flows into foreign markets could accelerate, pressuring U.S. multiples further.
Finally, corporate news — from mass layoffs to M&A chess — can exacerbate market moves when macro data disappoints. The combination of sticky inflation, AI-related uncertainty and headline corporate shocks increases the odds of continued choppy trading into the coming weeks.
Comparison & Data
| Index / ETF | Day Change | February YTD (approx.) |
|---|---|---|
| Dow Jones Industrial Average | -620 pts (-1.3%) | ~-0.3% |
| S&P 500 | -0.7% | ~-1% |
| Nasdaq Composite | -0.9% | ~-3%+ |
| iShares Expanded Tech-Software ETF (IGV) | – (sector pressured) | -10% (month), -23% YTD |
The table above condenses market moves on the session and the roughly estimated monthly trajectories reported for February. Day changes reflect Friday’s session; monthly figures are pacing estimates provided by exchange data and market commentary. Sector-level weakness in software and cyclicals has been a primary driver of monthly underperformance.
Reactions & Quotes
“This morning’s higher inflation data is one more thing to worry about within the ‘traditional’ economic analysis of price stability and full employment,”
Chris Zaccarelli, Chief Investment Officer, Northlight Asset Management
Zaccarelli’s comment captured the interplay between fresh inflation data and underlying market concerns about earnings and AI disruption; strategists said the print reinforced a cautionary stance among risk managers.
“We’re reducing Block by nearly half … which means that over 4,000 people are being asked to leave or entering into consultation,”
Jack Dorsey, Co-founder & CEO, Block (shareholder letter)
Management’s explanation for the cuts underscored an aggressive reorganization at Block and helped explain the company’s large premarket share swings ahead of broader market moves.
Unconfirmed
- Market speculation that Nvidia’s slide was driven primarily by concerns about its deal terms with OpenAI remains unverified and lacks direct confirmation from either company.
- Reports that hyperscalers will scale back near-term AI capital expenditures are anecdotal; broad, company-level capex guidance varies and is not universally confirmed.
- Short-term contagion from Block’s layoffs to other fintech firms is possible but not established; peer firms’ strategies and headcounts differ.
Bottom Line
Friday’s stronger-than-expected PPI reading and a slew of corporate headlines combined to push U.S. markets lower, reinforcing the market’s sensitivity to inflation and AI-related news. The data complicates the pathway to Fed easing and elevates the bar for corporate earnings to justify current valuations.
Investors should prepare for continued volatility: macro prints, tech and software guidance, and large-scale corporate moves (layoffs, M&A) are likely to drive day-to-day swings. Monitoring upcoming CPI readings, Fed communications and company-level guidance will be essential for assessing whether this pullback is a brief reset or the start of a more extended repricing.