Inflation and AI Fears Push Markets Lower as Oil Rises
Higher wholesale inflation and renewed worries about artificial intelligence combined to send U. S. stocks sharply lower on Friday, curbing month-end gains and lifting oil prices as geopolitical tensions flared. The headline inflation shock and fresh AI-driven layoffs focused investor attention across tech, finance and energy markets.
Big indexes fall as traders digest a hotter wholesale inflation reading
The S&P 500 fell 30 points, or 0. 4%, to close at 6, 879, while the Dow Jones Industrial Average tumbled 521 points. One account described the Dow’s drop as 1% and “more than 500 points, ” and another put the Dow decline at 1. 1%; the Nasdaq Composite sank roughly 0. 9%, with one report at 0. 8%—a mix of figures that reflected broad selling in the session. The pullback left the Nasdaq and the S&P 500 with monthly declines of more than 3. 3% and about 0. 86%, respectively, even as the Dow barely eked out a February gain of 0. 17%, extending a nine-month winning streak.
Inflation readings: monthly and annualized PPI surprised
On the macro front, January’s Producer Price Index showed wholesale inflation running hotter than expected. Monthly PPI rose 0. 5% and core PPI — which strips out food and energy — rose 0. 8% for the month, both above forecasts of 0. 3%. Another calculation presented the wholesale increase on an annualized basis at 2. 9% versus an economist projection of 1. 6%. Those richer inflation figures could influence the Federal Reserve’s timing on rate cuts.
Block’s cuts and AI warnings accelerate software sell-offs
Investor anxiety over AI intensified after Block’s leadership said the company will slash nearly half its workforce. Leadership described cuts from around 10, 000 employees to about 6, 000 — a reduction of more than 4, 000 jobs — and Block’s stock jumped 16. 8% on the news. Chair Jack Dorsey wrote that “Intelligence tools have changed what it means to build and run a company” and warned many firms will reach the same conclusion within a year. Those comments, coupled with other layoffs tied to AI at companies such as Pinterest and Dow, helped trigger steep losses in software names and a roughly 10% drop in the iShares software ETF for the month after the ETF probed last summer’s lows earlier in the week.
Winners and losers: streaming gains, tech routs and private-credit jitters
Netflix jumped 13. 8% after abandoning its bid for Warner Bros. Discovery’s studio and streaming business, leaving an Oracle-linked bidder, Paramount Skydance, to clinch the purchase. A few other names bucked the sell-off: RingCentral gained about 40%, while Cisco and SAP were little changed. But the broader damage was severe: Microsoft fell almost 9%, wiping out over $270 billion in market value; Oracle slid nearly 13% for a roughly $60 billion drop; Palantir, Intuit and Palo Alto Networks each shed about $25 billion. Unity and Atlassian plunged more than 35%, Asana fell about 30%, and Zscaler also weakened. Private-credit concerns rippled through markets as well, hitting private-equity–linked companies; Apollo Global Management was listed with drops of 8. 6% in one account and 8. 5% in another, and Blue Owl Capital fell about 6%.
Oil climbs as tensions with Iran and geopolitical rhetoric heat up
Oil prices rose with concerns about tensions between the United States and Iran. Benchmark U. S. crude settled up 2. 8% at $67. 02 a barrel, while Brent crude climbed 2. 4% to $72. 48. The escalation followed heightened rhetoric from the President, who said he would direct federal agencies to cease using a named AI developer and warned of possible military action if Iran did not rein in nuclear activity. Those moves coincided with comments from an AI company CEO that his firm would cut ties rather than lift usage restrictions for the government: “We cannot in good conscience accede to their request. ”
Analysts weigh in as market narrative shifts on AI
Market analysts said the narrative around generative AI has shifted from growth booster to potential replacement risk for legacy software. A senior research analyst wrote that investors now believe generative AI will replace many existing software tools. At the same time, an analyst pushed back, saying new AI tools are only as useful as the data they can reach and are unlikely to rip and replace entire software ecosystems overnight.
Looking ahead, Berkshire Hathaway’s CEO Greg Abel is expected to publish his first annual shareholder letter on Saturday after taking over from Warren Buffett; the letter will be released alongside the conglomerate’s quarterly and 2025 update.
