Dow Futures show a slight decline in anticipation of crucial inflation data. The consumer price index for January is expected to show a deceleration on an annualized basis, yet it remains above the Federal Reserve’s 2% target level. Stocks of the networking equipment provider and chipmaking machinery group experienced a notable increase in after-hours trading, following favorable reactions from the market to their most recent quarterly reports.
Dow Futures indicated a downward trend on Friday, reflecting a sense of caution among investors as they monitor a potential resurgence of selling pressure in technology stocks alongside significant forthcoming inflation data. By 02:52, the Dow futures contract experienced a decline of 109 points, representing a decrease of 0.2%, while futures slipped by 14 points, also reflecting a 0.2% drop, and another set of futures declined by 49 points, marking a 0.2% reduction. The primary indices experienced a decline in the previous session, burdened by a downturn in the technology sector, which mirrored emerging apprehensions regarding potential disruptions stemming from artificial intelligence. Throughout this week, traders have expressed concerns regarding the influence of AI on the operations across various sectors, including financial services, real estate, and insurance brokerage. Transport faced additional challenges on Thursday, impacted by a report indicating that a new tool from AI group Algorhythm Holdings has the potential to enhance the efficiency of freight shipping.In individual stocks, shares of a networking equipment provider declined by more than 12% following the announcement of disappointing quarterly gross margins. Cisco recently faced adverse effects from an AI-induced increase in memory chip prices, which are crucial components in the company’s switches and routers. “The significant challenge facing the market is that AI has now clearly turned into a net negative, exerting pressure on equities in three main ways: altering the mega-cap/hyperscaler models in a less advantageous direction; severely impacting legacy industries due to concerns (largely perceived, but some genuine) of disruption and displacement; and negatively affecting hardware OEM margins by increasing memory costs,” analysts stated in a note.
As stock markets face challenges from AI’s transformative potential, focus shifts once again to the economic calendar and the delayed release of January inflation figures on Friday. Headline consumer prices are projected to increase by 2.5% in the twelve months leading up to January, a deceleration from the 2.7% observed in December. On a month-on-month basis, the consumer price index from the Labor Department is projected to align with December’s rate of 0.3%. Excluding the more volatile components such as food and fuel, the “core” Consumer Price Index is anticipated to decelerate to an annual rate of 2.5%, while experiencing an acceleration of 0.3% compared to the previous month. In addition to serving as a vital indicator of the U.S. economic landscape, the markets will utilize the figures to evaluate the forthcoming trajectory of Federal Reserve interest rates. Federal Reserve officials decided to maintain the current interest rates during their January meeting, pointing to indications of persistent, though high, inflation and a labor market that is showing signs of stabilization. Despite the absence of significant price increases in recent months, inflation continues to exceed the Fed’s 2% target, which may strengthen the case for maintaining current borrowing costs for the foreseeable future. Meanwhile, earlier this week, a significant report revealed that the U.S. economy added a greater number of jobs than expected in January – however, analysts noted that a substantial portion of this increase was concentrated in the healthcare sector, which has historically profited from the growing population of older or aging Americans. In light of the current economic conditions, market participants anticipate that the Federal Reserve, having implemented several rate reductions last year to support the labor market, will refrain from introducing any additional cuts until at least the latter half of 2026. Today’s U.S. CPI report is expected to exert a lesser influence on the market compared to Wednesday’s payrolls. Analysts noted that the Fed has been signaling little urgency to cut again, with the jobs market being the primary factor that can influence the situation.
Arista Networks experienced a notable increase in its share price during after-hours trading, following the company’s reaffirmation of its full-year gross margin guidance, even in the face of challenges posed by rising memory chip prices. Similar to Cisco, Arista provides ethernet network switches and routers that form the foundation of data center infrastructure. Similarly to Cisco, Arista is contending with an extended shortage of memory chips, which has significantly escalated the costs associated with these processors. However, Arista has effectively countered these challenges through rigorous expense management and robust demand for its electronic hardware from a diverse range of clients, including major technology firms such as Microsoft and Meta, which are significantly increasing their investments in AI, analysts noted. In the fourth quarter, gross margins experienced a decline on an annualized basis; however, they exceeded market’s expectations. Despite the current-quarter estimate of 62.5% falling short of consensus expectations, the firm has reaffirmed its full-year projected range. In the fourth quarter, revenue reached $2.49, accompanied by a profit of $0.82, both of which surpassed expectations. Additionally, Arista’s forecast for first-quarter sales is approximately $2.6 billion, also exceeding projections.
Applied Materials has provided a positive outlook, highlighting the impact of the AI surge and the memory chip deficit on sales for the leading semiconductor equipment manufacturer in the United States. Shares of the company experienced a notable increase in after-hours trading activity. Applied has projected that fiscal second-quarter sales will be approximately $7.65 billion, with a margin of error of plus or minus $500 million, compared to LSEG estimates reported by Reuters of $7.01 billion. Adjusted profit is anticipated to be approximately $2.64 per share, with a variance of $0.20, exceeding expectations. CEO Gary Dickerson attributed the optimistic forecast to a “acceleration of industry investments in AI computing” and emphasized “high growth rates for leading-edge logic” chips that are essential for powering graphics processors and central processing units. Dickerson noted that Applied’s dynamic random access memory, which is stacked to create the chips utilized with advanced AI processors, is expected to be one of the company’s fastest-growing divisions this year. “This print felt more like a leap forward, with [Applied] surprising on multiple fronts,” analysts noted.
Gold prices experienced an uptick in European trade, mitigating losses from Thursday, which were driven by increased uncertainty regarding the trajectory of U.S. interest rates. Investors were concentrating on escalating tensions in the Middle East and the impending U.S. inflation data for additional insights. Silver experienced an uptick following a decline of approximately 10% in the previous session, as metal prices continue to exhibit volatility after significant fluctuations over the past week. Bullion experienced an uptick in safe haven demand on Friday, following multiple reports indicating that Washington intended to position a second aircraft carrier, the USS Gerald R. Ford, in the Middle East amid stalled nuclear negotiations with Iran. Spot gold increased by 1.2% to $4,979.75 per ounce as of 03:55, whereas gold futures advanced by 1.1% to $5,000.91 per ounce. Spot prices experienced a decline of more than 3% in the previous session.