Short On Time… Executive Summary
Artificial Intelligence (AI) continues to send disruptive waves through every industry. It is going to change the world, but it isn’t going to put everyone out of business. The pendulum always swings a little too far before coming back to center. Remember that. Seventy four percent of the S&P 500 has reported earnings so far this quarter and 74% of those reporting are beating earnings expectations. What does that tell you about corporate America? Things are going pretty well, and the wheels aren’t coming off the economy. Having said that, it is a midterm election year, so expect more volatility. Markets were closed Monday, so there’s always a little more volatility the day the market finally opens.
The Week On Wall Street
Stocks fell last week as investors reacted to mixed economic data and concerns over signs of broadening AI disruption of business models. The Standard & Poor’s 500 Index fell 1.39 percent, while the Nasdaq Composite Index declined 2.10 percent. The Dow Jones Industrial Average slid 1.23 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 1.92 percent.
AI Disruption Fears
Big tech started last week back in the driver’s seat, leading the Nasdaq and S&P 500 to modest gains as investors appeared cautiously optimistic about the economy and Q4 corporate reports. Stocks slid modestly on Tuesday after December retail sales were flat, sparking some anxiety about the economy. Investors also fretted about the impact of artificial intelligence (AI) on financial stocks. A stronger-than-expected jobs report initially sparked a rally midweek, but momentum quickly faded as investors dug deeper into the numbers. Stocks then came under pressure as AI disruption fears spread across several industry groups. Traders worried that AI would disrupt certain business models and possibly increase unemployment. Markets rebounded following Friday’s Consumer Price Index (CPI) reading, which gave investors another economic data point to cheer as the pace of inflation slowed in January.
Good News, Bad News
Investors focused on three key economic reports out last week: retail sales, jobs, and inflation. Here are the key good news/bad news takeaways from each report:
Retail sales: Consumer spending was flat in December, below expectations and below November’s 0.6 percent growth. Good news: Given that two-thirds of the economy runs on consumer spending, the Fed may reconsider its wait-and-see stance on raising rates.
Employment: January job growth was mostly concentrated in a single sector. Plus, downward revisions showed employers only added 181,000 jobs last year—70 percent fewer than initially thought. There was essentially no job growth in the back half of 2025. Good news: January job growth was more than double what economists expected—the biggest gain in over a year. The unemployment rate also edged down.
Inflation: Inflation was cooler-than-expected but remains above the Fed’s target. Good news: The CPI’s 2.4 percent year-over-year growth in January marked a drop from December’s 2.7 percent annual pace.
This Week: Key Economic Data
Monday: Markets closed for Presidents’ Day
Tuesday: Empire State Manufacturing Survey
Wednesday: Housing Starts (Nov., Dec.). Building Permits (Nov., Dec.). Durable Goods (Dec.). Trade Balance in Goods (Dec.). Retail Inventories (Dec.). Wholesale Inventories (Dec.). Federal Open Market Committee Meeting Notes (Jan.).
Thursday: Weekly Jobless Claims. Trade Deficit (Dec.). Pending Home Sales. Minneapolis Fed President Neel Kashkari speaks.
Friday: Gross Domestic Product (GDP), Q4. Personal Consumption Expenditures (PCE) Index (Dec.). New Home Sales (Nov., Dec.). Consumer Sentiment.
This Week: Companies Reporting Earnings
Stay tuned...
