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Stocks opened higher Friday, but the positive price action was short-lived as geopolitical risks lingered and economic data disappointed. Oil prices, meanwhile, continued their steady climb, even after the U.S. lifted sanctions on Russia to boost market supply.
At the close, the blue-chip Dow Jones Industrial Average was down 0.3% at 46,558, the broader S&P 500 was off 0.6% at 6,632, and the tech-heavy Nasdaq Composite was 0.9% lower at 22,105. All three indexes were down on the week, marking their third straight weekly loss – the longest losing streak of the year.
As for oil prices, front-month West Texas Intermediate (WTI) crude futures rose 3.1% to settle at $98.71 per barrel and are now up more than 47% for the month to date.
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Rising energy costs are amplifying inflation concerns ahead of next week’s Federal Reserve meeting. The central bank is widely expected to keep the federal funds rate unchanged this time around, even amid signs of a slowdown in the labor market.
But according to CME Group FedWatch, futures traders are now pricing in the probability that the first rate cut of 2026 will come at the Fed’s October meeting. Just a few weeks ago, betting odds favored June.
PCE data keep inflation worries front and center
Inflation was in focus Friday morning when the Bureau of Economic Analysis (BEA) released the shutdown-delayed Personal Consumption Expenditures (PCE) Price Index for January, which showed a monthly rise of 0.3% and an annual increase of 2.8%.
Core PCE, which excludes volatile food and energy prices, rose 0.4% from December to January and 3.1% from the year prior – the highest annual rate since March 2024.
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“The Fed’s preferred inflation metric shows the economy is still battling inflation,” says Jeffrey Roach, chief economist for LPL Financial, adding that “next month’s print will also be elevated, impacted by the war in the Middle East.”
Roach expects the Federal Reserve “to highlight the uncertainty” on both sides of its dual mandate when it meets next week, and anticipates “some important revisions in the upcoming Summary of Economic Projections.”
Q4 GDP slashed, job openings rise
Also on the economic calendar was the second look at fourth-quarter gross domestic product (GDP), which was cut to 0.7% from the initial reading of 1.4%. Economists expected GDP to be upwardly revised to 1.5%.
According to the BEA, the new number reflects “downward revisions to exports, consumer spending, government spending, and investment.”
Additionally, the Labor Department released the shutdown-delayed Job Openings and Labor Turnover Survey (JOLTS) for January, which showed job openings rose to 6.9 million from 6.6 million in December – higher than economists expected.
“GDP and the job market have been expanding, but the rate of change has been slowing, which leads to concerns about the overall economy and that was even before we started a war in the Middle East, which spiked the price of oil,” says Chris Zaccarelli, chief investment officer for Northlight Asset Management.
Zaccarelli calls stagflation concerns “premature,” but notes that “a shorter engagement [with Iran] could help allay those fears.”
Adobe sinks as CEO steps down
In single-stock news, Adobe (ADBE) fell 7.6% as news that the Creative Cloud parent’s CEO is stepping down overshadowed fiscal 2026 first-quarter earnings and revenue beats.
The tech stock generated a 540% return under Shantanu Narayen’s 18-year tenure as CEO. But more recently, shares have been under pressure amid worries that artificial intelligence (AI) will replace what software does. Year to date, ADBE is down nearly 29%.
Barclays analyst Saket Kalia said Narayen’s leadership at Adobe has “been exemplary,” but downgraded the stock to Equal Weight from Overweight, the equivalents of Hold and Buy, respectively, saying “it will take time for a new CEO to effect change here given ADBE’s $25-billion-plus [annual recurring revenue] base.”
Narayen said he will remain in the role until his successor is named “to ensure a smooth transition.”
Ulta stock drops after earnings, but Oppenheimer isn’t worried
Ulta Beauty (ULTA) was a notable decliner Friday, tumbling 14.2% after the cosmetics retailer reported earnings.
While Ulta’s fiscal fourth-quarter revenue of $3.9 billion was higher than analysts expected, its earnings per share of $8.01 fell short. This marked ULTA’s first bottom-line miss since July 2024.
The retailer also said it expects earnings per share to range between $28.05 to $28.55 in fiscal 2026, which, at the midpoint, is shy of analysts’ expectations for earnings of $28.40 per share.
But Oppenheimer analyst Rupesh Parikh isn’t too concerned. For one, he says, management tends to guide conservatively.
Additionally, “ULTA shares were priced close to perfection, in our view, in a high expectation setup, so we believe the initial re-rating lower makes sense,” Parikh notes.
He adds that he “would take advantage of the dip,” but he anticipates volatile trading “to continue amidst geopolitical uncertainty and increasing concerns on discretionary spend.”