No Clear Direction Despite Softer CPI
AI Shock and Bargain Hunting at Work Simultaneously
S&P 500 Plunges Early, Then Rebounds Sharply
The three major New York stock indexes ended mixed. Concerns that artificial intelligence (AI) could deliver a structural shock across industries weighed heavily on investor sentiment, but bargain hunting flowed in, producing sharp intraday volatility.
On the 13th (Eastern Time), on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 48.95 points, or 0.10%, from the previous session to close at 49,500.93. The Standard & Poor's (S&P) 500 Index gained 3.41 points, or 0.05%, to finish at 6,836.17. In contrast, the Nasdaq Composite Index fell 50.48 points, or 0.22%, to end the session at 22,546.67.
Inflation data came in milder than expected. According to the U.S. Department of Labor, the January all-items Consumer Price Index (CPI) rose 0.2% month-on-month on a seasonally adjusted basis. The pace of increase slowed from December of last year (0.3%) and came in below the market consensus of 0.3%. However, core CPI, which excludes the more volatile food and energy components, climbed 0.3% from the previous month, in line with expectations.
However, the slowdown in inflation did not translate directly into higher indexes. Equity index futures, which had widened their gains immediately after the CPI release, soon gave back those advances. The market appeared more focused on the structural impact that the spread of AI could have on industrial dynamics and corporate profitability than on the precise path of inflation.
Volatility was extreme at the start of the session. The S&P 500 Index plunged 50 points within 10 minutes of the opening bell, only to recover the same amount in just four minutes. Analysts noted that the growing share of algorithmic trading and leveraged trades has made ultra-short-term price swings more frequent.
Keith Buchanan, senior portfolio manager at Globalt Investments, said, "This CPI report offered no clues as to the scope of the industrial reshuffling triggered by AI," adding, "The market is still probing the extent of AI's spillover effects across the broader economy."
Emmanuel Cau, an analyst at Barclays, said, "Investors are ruthlessly selling companies they believe will fall behind in the AI race," adding, "As the list of these 'loser' companies grows, the gap between the new and old economy sectors, and between the United States and other regions, is also widening."
However, he added, "Despite high volatility and concerns about AI-driven industrial restructuring, growth rates, interest-rate levels, and corporate earnings remain generally solid," and, "It is still too early to draw firm conclusions about whether these issues will spill over into broader macroeconomic or credit risks."
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