Stocks showed initial gains on Friday following in-line PCE inflation data for January, which indicated core inflation rose by 2.6% year-on-year. This was a welcome sign compared to a revised figure of 2.9% in December, aligning with market expectations.
However, the mood shifted when a meeting between US President Trump and Ukrainian President Zelenskyy ended unsuccessfully. Tensions arose as Zelenskyy demanded security guarantees while Vice President Vance deemed his negotiations disrespectful, contributing to volatility in major stock indices.
Additionally, layoffs announced by Trump advisor Elon Musk and rising tariffs imposed on major trading partners raised concerns within the labour market. Initial Jobless Claims surged to 242,000, surpassing the anticipated 221,000.
Bearish sentiment was prevalent as major US indices remained below their starting points for the year. Nvidia’s stock plummeted 8.5% despite positive earnings, and the Dow Jones traded under its 100-day moving average.
Recent surveys indicated increased pessimism, with 60.6% of retail traders expecting market declines in six months. Meanwhile, 89% of fund managers believe the US stock market is overvalued, marking the highest proportion since April 2001.
The trading session initially looked promising after inflation data matched expectations. Core inflation showed a 2.6% year-on-year rise for January, which came as a relief when compared to December’s revised 2.9%. Many expected something similar, so there were no major surprises, leading to early gains in stocks.
That optimism, however, faded quickly. A meeting between Donald and Volodymyr ended on a sour note. The Ukrainian leader pressed for security guarantees, which did not sit well with Vice President Vance. She called his approach disrespectful—something the market did not take lightly. As tensions rose, so did volatility across major stock indices. The dip seen later in the session reflected the uncertainty surrounding geopolitical affairs.
Adding to the turbulence, Elon announced workforce reductions while new tariffs hit trade partners. That created fresh labour market concerns, which were reflected in a steeper-than-expected rise in initial jobless claims. The latest figures came in at 242,000, well above the anticipated 221,000. With layoffs in focus and protectionist policies tightening, economic worries deepened.
Investor sentiment took a clear hit. The US stock market remains under pressure, with major indices unable to climb back into positive territory for the year. Even Nvidia, which reported strong earnings, felt the weight of selling pressure. The company’s stock dropped 8.5%, defying expectations for a rally. At the same time, the Dow Jones slipped beneath its 100-day moving average, adding to concerns that momentum is fading.
Surveys paint a bleak picture as well. Retail traders have turned more pessimistic, with over 60% expecting further declines in the next six months. Institutional views are even more striking—nearly nine in ten fund managers now think the US stock market is overpriced. That level of concern has not been this high since April 2001, a period that carried its own set of troubles.
For those keeping an eye on derivatives, all of this suggests a complex few weeks ahead. With equity weakness persisting, geopolitical uncertainty on the rise, and labour market fears creeping back in, there is no shortage of factors that could shift price action. Conversations around monetary policy will matter too, though for now, inflation appears to be moving in the right direction.
