U.S. stocks ended the week lower despite favorable developments in labor market and inflation data, as artificial intelligence (AI) shifted from a tailwind to a headwind for several market segments, including enterprise software and commercial real estate.
For the week, the Dow Jones Industrial Average declined by 1.23 percent to 49,500, with most of the losses occurring during the Feb. 12 session. The S&P 500 finished at 6,836, down by 1.39 percent, while the tech-heavy Nasdaq Composite fell by 2.10 percent. The Russell 2000 edged lower by 0.89 percent.
Market volatility remained relatively steady early in the week before spiking toward the end. The Chicago Board Options Exchange Volatility Index climbed above 22 on Feb. 12, dipped on the morning of Feb. 13, and then rose again in the afternoon to close at 20.6, ending the week 1.13 percent higher.
Equities opened Feb. 9 on a weaker note amid profit-taking but quickly reversed course, building on the Feb. 13 gains that had pushed the Dow above 50,000 for the first time. Positive sentiment was supported by a reassessment of Claude’s impact on the software sector, with Microsoft, Oracle, and Palantir leading gains, while Salesforce and Intuit continued to lag.
Semiconductor stocks remained firm, supported by expectations of sustained AI-related infrastructure spending. Nvidia, AMD, and Broadcom posted solid gains. Alphabet’s $20 billion bond sale to help finance its AI investments also supported the sector.
At the same time, rotation from large-cap stocks into small caps extended the Russell 2000’s advance. By the close, all major indexes finished in positive territory, led by the Nasdaq, up by 0.90 percent, and the Russell 2000, up by 0.70 percent. The small-cap index had risen 6.5 percent year to date as of Feb. 6 and was trading around 2,692 points.
Markets turned choppy on Feb. 10, opening higher before reversing in the afternoon to close mixed. The S&P 500, Nasdaq, and Russell 2000 finished lower, while the Dow posted a slight gain.
One factor behind the volatility was December retail sales data, which showed sales up by 2.4 percent from a year earlier—the smallest annual gain since September 2024—compared with a 3.3 percent rise in November.
Weaker retail sales signaled softer consumer spending, creating mixed implications for equities. Slower spending pressures consumer-products companies’ revenue but may increase the likelihood of Federal Reserve rate cuts. The yield on the U.S. 10-year Treasury note fell nearly six basis points to 4.15 percent on Tuesday, its lowest level since mid-January.
Reflecting these crosscurrents, shares of consumer companies such as Walmart, Costco, TJX Companies, Macy’s, and GM were pressured, while interest-rate-sensitive sectors such as homebuilders gained.
Profit-taking and lighter trading volumes ahead of key labor and inflation reports also contributed to market swings.
“It’s a big week for economic data, with fresh reads on the consumer, jobs, and inflation. So far, though, the tone has been disappointing: December retail sales came in below expectations. Headline, core, and control group sales all missed forecasts and landed near the low end of economists’ estimates,” eToro U.S. Investment Analyst Bret Kenwell told The Epoch Times.
“This report isn’t a disaster, but it isn’t a constructive signal either, especially with lingering labor-market concerns and continued volatility across several asset classes,” he added.
“Today’s U.S. retail sales report may have missed expectations moving from November to December, but in comparing the year-over-year numbers, 3.5 percent is somewhat on track with retail performance,” said Katie Thomas, head of the Kearney Consumer Institute.
“A longer holiday retail season, which used to result in consumers buying more, backfired this year: People bought earlier and wrapped up their holiday spend earlier.”
Thomas said that much of the apparent growth reflects higher prices rather than increased purchasing volume. She said retail sales forecasts may have fallen short due to an “overgeneralizing of the K-shaped economy and counting on spending from the top of the K, when consumers there are being thoughtful as well.”
Volatility continued on Feb. 11 following the delayed release of the January payroll report, which showed the economy added 130,000 jobs, up sharply from a downwardly revised 48,000 in December and well above expectations of 70,000.
Nicole Bachaud, a labor economist at ZipRecruiter, told The Epoch Times that the report presents a nuanced picture of an economy regaining footing after a sluggish year.
Robert Edwards, chief investment officer at Edwards Asset Management, agreed, noting that job creation remains steady.
“Wednesday’s labor report is unlikely to change anything for the Federal Reserve, which is likely on pause when it comes to any further rate cuts until there is a new Fed Chair,” he told The Epoch Times.
Bond yields rose in response, with the 10-year Treasury yield climbing back toward 4.20 percent.
Higher yields pressured interest-rate-sensitive stocks, including financials. Bank of America, Wells Fargo, and JPMorgan closed lower. Renewed selling in software stocks—amid concerns over rising competition from AI models—also weighed on markets, with Microsoft, Intuit, Adobe, and Salesforce declining.
Major indexes fluctuated between gains and losses before closing modestly lower, with the Russell 2000 down by 0.38 percent.
As in the prior week, selling intensified on the Feb. 12 trading session as AI concerns spread beyond software into logistics, brokerage, and commercial real estate. CBRE Group fell by 8.84 percent, while Cushman & Wakefield declined by 11.52 percent.
A renewed sell-off in metals and Bitcoin added to pressure, and all major averages closed sharply lower. The Dow dropped by 1.34 percent, the S&P 500 fell by 1.57 percent, and both the Nasdaq and the Russell 2000 were down by nearly 2 percent.
Markets rebounded on Feb. 13 following strong earnings from Applied Materials and Arista Networks, which supported the technology sector, but failed to erase the previous day’s losses.
Investor sentiment was further lifted by easing inflation data. The annual inflation rate slowed to 2.4 percent in January, its lowest level since May, down from 2.7 percent in the previous two months and below expectations of 2.5 percent.
“Friday’s delayed January CPI was muted and in line with expectations, and it won’t increase the likelihood of a rate cut within the next few months, largely because Wednesday’s blowout employment numbers threw ice-cold water on any hopes of a near-term rate cut,” Skyler Weinand, chief investment officer at Regan Capital in Dallas, which manages $3.8 billion in assets, told The Epoch Times.
“The Fed is always in a tug of war between balancing inflation with employment, but they just can’t cut rates right now with the economy having just created a six-figure jobs number.”
The day’s session reflected the ongoing see-saw between bulls and bears, with the Dow, S&P 500, and Russell 2000 finishing in positive territory, while the Nasdaq ended lower.
Charlie Anderson of UBS Wealth Management advised investors to focus on diversification as market leadership broadens beyond large technology stocks.
“A diversified portfolio that participates in growth while managing downside volatility can deliver strong long-term returns,” he told The Epoch Times.