Wall Street steadies after its AI-induced sell-off

Stock trader Frank Masiello works at the New York Stock Exchange, Tuesday, Feb. 4, 2020. Stocks are openig broadly higher on Wall Street, following gains overseas. AP Photo/Mark Lennihan

NEW YORK — U.S. stocks steadied on Friday after an encouraging update on inflation helped calm a Wall Street that’s been wracked by worries about how artificial-intelligence technology may upend the business world.

The S&P 500 barely budged, a day after it had tumbled to one of its worst losses since Thanksgiving. The Dow Jones Industrial Average rose 48 points, or 0.1 per cent, and the Nasdaq composite slipped 0.2 per cent.

Stocks got some help from easing Treasury yields, which fell after a report showed inflation slowed last month by more than economists expected. U.S. consumers paid prices for groceries, clothes and other costs of living that were 2.4 per cent higher overall than a year earlier.

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While that’s higher than anyone would like and above the two per cent target set by the Federal Reserve, it wasn’t as bad as December’s 2.7 per cent rate. And an underlying measure of inflation that economists see as a better predictor of where it may be heading slowed to the least-painful level in nearly five years.

“It’s still too high, but only for now, not forever,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management.

Besides helping U.S. households struggling to keep up with the cost of living, slower inflation could also give the Federal Reserve more leeway to cut interest rates, if needed. The Fed has put its cuts to interest rates on hold, but the widespread expectation is that it will resume later this year.

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Reducing rates would give the economy a boost and juice prices for stocks. What holds the Fed back from cuts is that they can give inflation more fuel.

In the meantime, the economy seems to be in a better place than at the end of 2025. Besides the slowdown in inflation, it also saw the job market improve last month by more than economists expected.

On Wall Street, stock prices steadied for several companies that investors had earlier targeted as potential losers from AI disruption.

AppLovin, for example, lost nearly a fifth of its value on Thursday even though it reported a stronger profit than analysts expected. Investors have been worried that it and other software companies could see AI-powered competitors take away customers and fundamentally change their industries.

On Friday, AppLovin climbed 6.4 per cent.

Trucking and freight companies also tumbled on Thursday after a small company, Algorhythm Holdings, said its AI platform helps customers scale freight volumes by up to 400 per cent “without a corresponding increase in operational headcount.” After sinking 14.5 per cent Thursday, C.H. Robinson Worldwide rose 4.9 per cent on Friday.

Such drops have been rolling through the market recently, targeting industries that investors decide are under threat for disruption by AI. The reactions have been so aggressive and so quick that analysts have likened it to a “shoot first, ask questions later” mindset.

Applied Materials was the strongest single force pushing upward on the S&P 500 after rising 8.1 per cent. The company, whose products help make chips and displays, reported a stronger profit for the latest quarter than analysts expected. CEO Gary Dickerson credited “acceleration of industry investments in AI computing.”

On the losing end of Wall Street was DraftKings, which dropped 13.5 per cent even though its profit for the latest quarter topped analysts’ expectations. It gave a forecast for revenue this year that fell short of expectations.

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Norwegian Cruise Line Holdings fell 7.6 per cent after replacing its CEO, just a few weeks before it will report its latest quarterly results. The cruise ship operator said John Chidsey, a director at the company who used to be CEO of Subway Restaurants, is replacing Harry Sommer, effective immediately.

The heaviest weight on the market was Nvidia, which fell 2.2 per cent. Because it’s the largest stock on Wall Street, its moves carry more weight on the S&P 500 than any other company’s.

All told, the S&P 500 added 3.41 points to 6,836.17 to close out its worst week since November. The Dow Jones Industrial Average rose 48.95 to 49,500.93, and the Nasdaq composite fell 50.48 to 22,546.67.

In the bond market, the yield on the ten-year Treasury fell to 4.05 per cent from 4.09 per cent late Thursday. The yield on the two-year Treasury, which more closely tracks expectations for Fed action, sank more. It dropped to 3.40 per cent from 3.47 per cent.

In stock markets abroad, indexes fell in Asia and were more mixed in Europe. Hong Kong’s Hang Seng dropped 1.7 per cent, and Japan’s Nikkei 225 fell 1.2 per cent for two of the bigger moves.

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Stan Choe, The Associated Press

AP Business writers Chan Ho-him and Matt Ott contributed.