Early in the Friday trading session, stocks made a recovery despite initial pressures. While they moved from their lowest points of the day, the major averages remained in the red.
Regarding specific figures, there were moderate falls across the board. The Dow dropped by 81.13 points (or 0.2%), settling at 38,691.99. The Nasdaq fell by 55.10 points (or 0.4%), ending up at 15,851.08. The S&P 500 lost 6.77 points (or 0.1%), closing at 5,022.96.
Fear about future interest rates traced back to a Labor Department report. It highlighted a greater than anticipated increase in U.S. producer prices during January, fueling these fears. According to the report, the producer price index for final demand went up by 0.3% in January, following a 0.1% decrease in December, beating the economists' expectation of a minor 0.1% rise.
The core producer prices, not considering costs for food, energy, and trade services, rose by 0.6% in January after December’s 0.2% increase. Admittedly, the annual growth rate of the producer price did slow to 0.9% in January from December's 1.0%. However, this was still above economists' expectations of a deceleration to 0.6%.
After the release of higher than expected consumer price inflation data earlier in the week, this particular data fueled speculations that the Federal Reserve might delay interest rate cuts more than investors initially expected.
However, a separate report from the University of Michigan, indicating a slight increase in consumer sentiment during February, offset some negativity. The consumer sentiment index nudged upward to 79.6 in February from January’s 79.0. This leap represents the highest level since July 2021, which peaked at 81.2.
According to Joanne Hsu, Director of Surveys of Consumers, this stagnation in sentiment signals that consumers remain optimistic about the economy, reinforcing the significant improvements seen in December and January across diverse economic aspects.
In sector-specific news, the computer hardware sector suffered a significant downturn, leading to a 3.2% fall in the NYSE Arca Computer Hardware Index. Super Micro Computer acted as the chief cause of this drop, plunging by 11% following an Equal Weight rating from Wells Fargo.
Telecom stocks reflected substantial weakness as well, with the NYSE Arca North American Telecom Index recording a 2.0% slump. The airline, commercial real estate and networking sectors also experienced declines, while the pharmaceutical sector climbed notably.
In overseas trading, most stock markets in the Asia-Pacific region reported gains on Friday, with Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index advancing by 0.9% and 2.5% respectively. Similarly, the major European markets trended upward, with the U.K.'s FTSE 100 Index leaping by 1.6%, the French CAC 40 Index rising by 0.4%, and the German DAX Index experiencing a 0.2% increase.
In the bond market, there was a swift retreat of treasury after an increase over two previous sessions. This resulted in a 10.8 basis point boost in the yield on the ten-year note to 4.299 percent.
