The Dow Jones Industrial Average edged higher Friday, closing at 49,500.93 after gaining 48.95 points. The modest advance followed the release of January inflation data, which showed the core Consumer Price Index rising 0.3% month-over-month and 2.5% year-over-year—its smallest annual increase in almost five years.
Markets Find Relief in Cooling Inflation
Investor sentiment improved as the inflation reading came in softer than anticipated. The data prompted a decline in Treasury yields, with the benchmark 10-year note falling to 4.05%. According to the CME FedWatch Tool, traders now assign a 52.3% probability to a Federal Reserve interest rate cut in June.
Despite the positive daily move, major indices recorded significant weekly losses. The Dow dropped 1.2% over the five sessions, its largest weekly decline since November. The S&P 500 fell 1.4%, while the Nasdaq Composite sank 2.1%, pressured by continued weakness in large-cap technology stocks.
Economic Crosscurrents Keep Fed on Alert
While the inflation trend appears favorable, economists caution the path ahead may be uneven. A surprisingly strong January jobs report, which showed 130,000 new positions added, complicates the outlook and could keep central bank policymakers hesitant. Market participants will scrutinize upcoming data, including the core Personal Consumption Expenditures price index—the Fed's preferred inflation gauge—due later this week.
Trading was closed Monday for the Washington's Birthday holiday. Attention now turns to a packed economic calendar, featuring the New York Fed's Empire State manufacturing index, NAHB housing market data, Fed meeting minutes, and preliminary fourth-quarter GDP figures.
Corporate earnings also remain in focus, with Dow component Walmart scheduled to report its fiscal fourth-quarter results before the market opens on Tuesday, February 19.
