Key Takeaways
- US Q4 GDP growth slowed sharply to 1.4%, missing the consensus estimate of 2.8% and marking a significant deceleration from the previous quarter's 4.4%.
- The Core PCE Price Index rose 3.0% year-over-year in December, coming in hotter than the 2.9% forecast and complicating the Federal Reserve's path toward interest rate cuts.
- US Equity Futures turned negative following the data release, with Nasdaq 100 Futures leading the decline with a 0.4% drop as investors weighed stagflationary signals.
- Nvidia (NVDA) shares fell 0.3% in pre-market trading following reports that its investment in OpenAI may be capped at $30 billion, down from a previously discussed $100 billion.
- Canada reported a massive spike in industrial prices, with the Industrial Product Price Index jumping 2.7% in January, far exceeding the 0.2% estimate.
US Growth and Inflation Divergence
The United States economy faced a "double whammy" of disappointing data on Friday morning, as growth figures missed expectations while inflation indicators heated up. Gross Domestic Product (GDP) for the fourth quarter grew at an annualized rate of only 1.4%, well below the 2.8% analysts had anticipated. This slowdown suggests a cooling economy even as the GDP Price Index came in at 3.6%, higher than the 2.8% estimate.
Simultaneously, the Federal Reserve's preferred inflation metric, the Core PCE Price Index, showed persistent price pressures. The index rose 0.4% month-over-month and 3.0% annually in December. These figures suggest that while the broader economy is losing steam, the "last mile" of the inflation fight remains difficult for policymakers.
Market Reaction and Fed Outlook
Wall Street reacted poorly to the data mix, with S&P 500 E-mini futures falling 0.3% and Dow futures slipping 0.2%. Despite the hotter-than-expected inflation data, short-term interest-rate futures remained relatively stable, with traders largely sticking to bets for a Federal Reserve rate cut in June.
Spot Gold remained resilient in the face of the data, trading last at $5,026.13 per ounce, up 0.6% on the day. The precious metal appears to be drawing support from its status as a hedge against both economic uncertainty and persistent inflation.
Corporate Pre-Market Movers
In the technology sector, Nvidia (NVDA) saw its stock move 0.3% lower following reports regarding its partnership with OpenAI. The chipmaker is reportedly close to a $30 billion investment in the AI firm, a significant reduction from a previously rumored $100 billion memorandum that failed to progress.
Other notable movers included Comfort Systems USA (FIX), which surged 5.2% on positive revenue developments. Conversely, Blue Owl Capital (OWL) was linked to a 2.2% decline in related data center interests after reports surfaced that the firm failed to secure financing for a $4 billion data center project.
Canadian Economic Update
Across the border, Canada released a mix of retail and industrial data. Retail Sales for December fell 0.4%, slightly better than the 0.5% contraction expected by markets. However, the real surprise came from the Industrial Product Price Index, which surged 2.7% in January against a 0.2% estimate. Raw Materials Prices also skyrocketed 7.7%, suggesting that inflationary pressures at the producer level may soon migrate to Canadian consumers.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.