Key Takeaways
- US headline inflation cooled to 2.4% in January, falling below the expected 2.5% and down from 2.7% in December, significantly boosting expectations for a Federal Reserve rate cut as early as June.
- Global trading remains thin as US markets are closed for Presidents' Day and major Asian hubs, including China and South Korea, remain shut for the week-long Lunar New Year holidays.
- AI "cannibalization" fears are driving a sharp rotation out of megacap technology stocks like Nvidia (NVDA) and Apple (AAPL), with software and services indices plunging 20% over the last month.
- Japan's Q4 GDP disappointed with a mere 0.2% annualized growth rate against estimates of 1.6%, pressuring the Japanese Yen as USD/JPY rebounded back above the 153.00 level.
- Gold prices held firm near record levels, trading at $5,030.30 per ounce, supported by falling Treasury yields and record monthly inflows into gold ETFs totaling $19 billion in January.
Global financial markets entered a period of holiday-thinned volatility on Monday as investors digested a cooler-than-expected US inflation report. The Consumer Price Index (CPI) for January showed headline inflation easing to 2.4%, the lowest level in nearly five years, which has led money markets to price in a 68% probability of a Federal Reserve interest rate cut by June. While the S&P 500 (SPX) finished Friday nearly flat at 6,836.17, the benchmark 2-year Treasury yield fell to 3.41%, its lowest daily close since 2022.
The technology sector continues to face significant headwinds as a new narrative of AI-driven structural disruption takes hold. Investors are increasingly wary of "AI losers"—companies in software, business services, and media whose pricing power may be threatened by generative AI tools. This sentiment saw Nvidia (NVDA) and Apple (AAPL) decline more than 2.2% on Friday, while the Nasdaq Composite (IXIC) edged down 0.2% to 22,546.67. Conversely, non-tech sectors such as finance and industrials have seen renewed interest, with NatWest (NWG) climbing 4.8% following a price target upgrade from Citigroup (C).
In the commodities space, a "RAMmageddon" is feared within the memory-chip industry as the rapid build-out of AI data centers diverts capacity, threatening to squeeze margins for electronics manufacturers. Meanwhile, precious metals remain a primary focus for diversification; gold is currently testing the $5,140 resistance level after recovering from a brief "flash crash" earlier in the month. China remains a "silent regulator" of these prices, though its domestic markets will remain closed through February 23, potentially limiting further upside in industrial metals in the near term.
Corporate activity is highlighted by a developing battle in the logistics sector as the money manager Aberdeen announced its opposition to a $9.25 billion takeover of InPost (INPST) by a consortium led by FedEx (FDX). Aberdeen, which holds a 0.2% stake, characterized the bid as an "opportunistic attempt" to exploit temporary stock weakness. Traders are also looking ahead to a heavy earnings week starting Tuesday, with high-profile reports due from Walmart (WMT), Warner Bros. Discovery (WBD), and Palo Alto Networks (PANW).
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.