Friday’s market activity painted a telling picture of investor sentiment as we saw notable shifts across equities, bonds, and commodities. Based on the current data on Investing.com, it’s evident that markets are recalibrating expectations around Fed policy, economic growth, and geopolitical tensions—with each factor exerting a unique pressure on various asset classes.
Equity markets today traded with a cautious tone. The S&P 500 opened lower and remained under pressure throughout the session, closing in the red, erasing gains from earlier in the week. The decline was largely driven by a fresh round of stronger-than-expected data on personal consumption expenditures (PCE) inflation—the Fed’s preferred measure of inflation. The core PCE index rose by 0.2%, slightly above the consensus, adding to concerns that inflationary pressures are not abating as quickly as previously hoped. This throws into question the already fragile narrative about potential rate cuts in the second half of 2026.
Tech stocks were particularly vulnerable, with the Nasdaq Composite sliding more than 1.2% intraday before paring back some of its losses. This was largely due to renewed weakness in semiconductor names—NVIDIA and AMD both dropped after a JP Morgan analyst downgrade citing overvaluation in current sector pricing relative to forward earnings expectations. In my view, this reflects deep skepticism about the sustainability of AI-driven gains without clearer signals about broader demand in 2026.
Bond markets, on the other hand, mirrored prevailing fears of sticky inflation and a potentially more hawkish Federal Reserve. The yield on the 10-year Treasury clawed back to 4.17%, its highest level in over a week. This rise was not just a reflection of inflation expectations but also weighed by the upcoming Treasury auctions anticipated next week. Investors are seeking clarity on whether the Fed will taper or postpone any dovish pivot which had been priced in aggressively since December. The futures market now implies a 35% probability of a rate cut in May, down from 48% last week. That recalibration is significant, and I see it as a critical turning point: markets are transitioning from “optimistic pause” to “extended hold.”
Commodities presented mixed signals. Gold saw a minor pullback despite broader concerns about inflation. In most cases, such inflationary data would act as a catalyst for higher gold prices as a hedge. However, with real yields rising, gold’s attractiveness fades slightly, leading to a selloff among speculative holders. Oil prices conversely extended gains, with front-month WTI climbing above $78 per barrel—a level last seen in mid-January. This bullish momentum was supercharged by a sharper-than-expected drawdown in U.S. crude inventories according to EIA data, coupled with ongoing disruptions in the Red Sea affecting shipping lanes and oil flows. As someone closely monitoring global supply-chain dynamics, I believe energy prices may face rising volatility in Q1 2026.
Overall, while macroeconomic data this week did not upend the broader narrative of a soft landing, it did raise credible questions about timing and sustainability. With volatility creeping back into rates and equity markets reacting sensitively to each new economic print, I expect near-term price action to remain choppy. Investors are not pricing in a pivot anymore—they’re looking for a Plan B. And until the Fed answers that, uncertainty will continue to dictate the tone.