Wall Street ended the week in negative territory as persistent weakness in the technology sector and escalating geopolitical tensions weighed on investor sentiment. The S&P 500 slipped 0.44% to close at 6,878.88, while the tech-heavy Nasdaq Composite declined 0.95% to 22,668.21. The Dow Jones Industrial Average led losses, falling 1.31% to 48,977.92, reflecting broader risk aversion across sectors.

Bond Yields Fall on Stagflation Fears

U.S. Treasury yields moved lower after stronger-than-expected January inflation data intensified concerns that the economy could face a stagflationary environment. The 2-year yield fell 10 basis points to 3.38%, the 10-year yield dropped 13 basis points to 3.96%, and the 30-year eased to 4.63%. The decline suggests investors are increasingly cautious about growth prospects while inflation pressures remain sticky.

Dollar Dips, Commodities Advance

Despite firm producer price data, the U.S. dollar edged slightly lower as traders reduced positions ahead of month-end. Meanwhile, commodities rallied on heightened geopolitical risk.

Brent crude rose 2.5% to US$72.52 per barrel, while West Texas Intermediate gained 2.17% to US$67.38, driven by concerns that tensions between the U.S. and Iran could disrupt global supply.

Gold also climbed as investors sought safe-haven assets, with spot prices up 1.44% to US$5,261.36 per ounce.

Producer Prices Highlight Persistent Inflation

January’s Producer Price Index (PPI) increased 0.5% month-over-month, following a revised 0.4% rise in December. Although annual producer inflation eased slightly to 2.9%, the underlying details were less reassuring. Services prices rose 0.8%, including a notable increase in trade services, while core goods prices (excluding food and energy) recorded their strongest monthly gain since May 2022. The data reinforces concerns that inflation remains embedded in certain sectors of the economy.

Escalation in the Middle East

Markets were further unsettled after the United States, under President Donald Trump, launched major military operations against Iran. Reports that Iran’s Supreme Leader, Ali Khamenei, was killed in the strikes triggered retaliatory missile and drone attacks across the Gulf region.

The developments have raised fears of disruptions to oil flows through the Strait of Hormuz, a key global energy chokepoint, adding another layer of uncertainty to already fragile markets. European economies are also preparing for potential energy price spikes.

Corporate Developments

• FedEx faces a proposed class-action lawsuit linked to emergency tariffs deemed unlawful.
• Nvidia announced two US$2 billion investments to expand its AI networking business.
• Warner Bros. Discovery agreed to merge with Paramount Skydance after Netflix declined to raise its bid.
• Amazon reported temporary data centre disruptions in the Gulf region following retaliatory strikes.

The Week Ahead

Investors will closely watch upcoming U.S. economic releases, including manufacturing and services PMIs, the ADP employment report, jobless claims, productivity data, and Friday’s employment report.

With inflation pressures lingering and geopolitical tensions escalating, markets may continue to experience heightened volatility in the near term.