Wall Street Remains Uneasy Despite Inflation Surprise: What’s Next?

On February 13 in New York, the stock market steadied on news of easing inflation, but lacked a clear direction. The S&P 500 edged up 0.05% to 6,836.17 and the Dow rose 0.1% to 49,500.93, while the Nasdaq slipped 0.2%. For the week, the S&P 500 fell 1.4% and the Nasdaq dropped 2.1%, extending a tech-heavy correction.

The biggest market mover was January’s consumer price index. Headline CPI rose 2.4% year-over-year—below both the 2.5% estimate and December’s 2.7%—reaffirming a disinflationary trend. Core inflation, however, remained at 2.5%, still above the Federal Reserve’s target, pushing out expectations for rate cuts to June (with about an 80% implied probability) rather than an immediate reduction. Ten-year U.S. Treasury yields fell from 4.09% to 4.05%, and two-year yields declined from 3.47% to 3.40%.

Tech and software shares, which had plunged the day before on fears of AI disruption, ended mixed. Heightened AI competition concerns weighed on some names, but equipment and semiconductor firms benefited. Applied Materials jumped over 8% on an earnings surprise tied to expanded AI spending, making the largest contribution to the S&P 500’s gain. In contrast, DraftKings plunged more than 13% after lowering its revenue outlook, and Norwegian Cruise Line fell about 7% on news of a CEO change, underscoring continued idiosyncratic volatility.

On the global front, crude oil dipped below $63 a barrel, reinforcing hopes for easing inflationary pressures. The International Energy Agency warned of a record 3.7 million barrels per day surplus in 2026, and signs of easing U.S.-Iran tensions kept both WTI and Brent on a weekly decline. While energy stocks face headwinds, the broader relief in price pressures is viewed as a medium- to long-term positive for equities. Still, with lingering AI disruption fears and geopolitical risks, investors will need to monitor Fed commentary, upcoming inflation data, and AI-related earnings guidance.