Inflation Cools but Tech Turmoil Limits Stock Gains

U.S. stocks experienced volatility with inflation showing signs of cooling. However, fears surrounding AI-driven disruption limited gains. Traders increased the odds of a June interest-rate cut by the Federal Reserve. Despite a rally in some sectors, big tech stocks suffered losses, impacting the overall market performance.

U.S. stocks climbed cautiously amid Friday's volatile trading as newly released data pointed to easing inflation concerns. Despite this positive economic indicator, fears related to AI-driven market disruptions kept a lid on gains, marking the S&P 500 and the Dow's worst weekly performance since November.

Consumer price growth fell short of expectations, nudging traders to anticipate a Federal Reserve rate cut by June with increased probability. Michael Metcalfe of State Street Markets highlighted the ongoing trend of disinflation, suggesting that inflation anxieties have peaked, potentially allowing for lower rates later in the year.

Concerns over AI's impact sparked a sector-wide sell-off, although healthcare shares provided support to the markets, bolstered by strong performances from Eli Lilly and UnitedHealth. In contrast, major tech stocks, including Nvidia and Alphabet, struggled, with uncertainties affecting investor confidence amidst hefty AI-related investments.

(With inputs from agencies.)