Fixed Income & Equities Markets Week in Review

US stocks navigated a choppy path this week as investors balanced economic data, shifting Federal Reserve (Fed) interest rate reduction expectations, fresh tariff uncertainties, and continued uneasiness about potential disruptions in the artificial intelligence (AI) secular growth story. Volatility reflected efforts to recalibrate and/or reconcile expectations.

Economic data released during the week built on last week’s softer than expected 4th quarter GDP data and the mixed PCE reading. Consumer confidence and housing-related indicators suggested that higher interest rates continue to weigh on rate-sensitive areas of the economy. Fresh inflation data came at the end of the week. The January core Producer Price Index (PPI) of +0.8% month/month was higher than an expected 0.3%, while annualized core PPI of 3.6% was well above the 3.0% consensus estimate and the highest since March 2025.

The equities market was sensitive to whether disinflation progress had stalled after firmer readings earlier in the year -- and how this might affect the potential for rate cuts by the Fed. In the meantime, Fed speakers continued to reinforce a data-dependent stance, signaling patience rather than urgency. This messaging dampened expectations for near-term easing.

Fresh tariff/trade uncertainty came into play after the Supreme Court, late last week, invalidated President Trump’s assertion of emergency tariff powers under IEEPA. President Trump immediately reimposed a new 15% global tariff under a separate trade authority and announced several other trade investigations. It is unclear how these new developments will play out and the market is in a “wait and see” mode for now, but policy uncertainty is on the radar screen.

The AI disruption story remained a focal point, fueled by some prominent news:

At the beginning of the week, Citrini Research released a report, titled “The 2028 Global Intelligence Crisis,” which was positioned as a forward-looking scenario analysis where autonomous AI agents and automation displace large swaths of white-collar workers, fundamentally undermine consumer demand and economic stability, trigger private credit stress, and lead to a recession & high unemployment. This vivid, speculative “what if” scenario triggered a sharp rise in worry on Monday. However, throughout the week many strategists and economists pushed back, arguing that AI is more likely to augment productivity and create new opportunities than generate a self-reinforcing economic collapse.

• Anthropic held its enterprise AI event, releasing new plug-in AI enterprise agents to help automate work in areas including human resources, finance, engineering, and design, among other areas. It also announced that its Claude Code can be used to modernize COBOL systems. (This caused a more than 13% drop in IBM shares on Monday (IBM is a key COBOL provider) and helped re-charge AI Disruption fears.)
  
  
• Block (XYZ) announced that it will cut 40% of its workforce (4,000 employees), citing AI for the move and noting that intelligence tools have changed what it means to build and run a business.
  
  
• Nvidia (NVDA) shares were under pressure during the week, despite another meaningful quarterly revenue and earnings beat and enthusiastic comments about its outlook. There was no great explanation for the downdraft other than perhaps that the rosy results were not enough to exceed lofty expectations and that it triggered a “sell the news” reaction, where investors lock in gains after a prominent release of company information.