S&P 500, Dow, Nasdaq rise as CPI inflation cools, but weekly losses loom

US stocks climbed on Friday but remained on track for weekly losses as Wall Street digested a cooler-than-expected inflation reading for a steer on the path of interest rates.

The S&P 500 led the way up with a gain of roughly 0.5%, while the Dow Jones Industrial Average and the tech-heavy Nasdaq Composite  picked up roughly 0.3% and 0.4%, respectively.

Inflation cooled more than expected in January, data released Friday by the Bureau of Labor Statistics showed. The Consumer Price Index showed that consumer prices increased 0.2% in January from a month earlier, and 2.4% on an annual basis.

The report is likely to shape expectations for an already complicated Federal Reserve policy. Traders revived some bets on a June cut, with a majority expecting a quarter-point reduction that month. Most bets remain on two cuts by the end of 2026, though a larger percentage of traders is now betting on more reductions.

The moves came after a day of heavy selling as fears about AI disruption spilled into sectors such as real estate, logistics, and transportation — "old economy" names previously seen as a safe alternative to AI-tied stocks. Techs got pummeled, with all seven of the "Magnificent Seven" megacaps finishing lower. The sell-off has set the Dow, S&P 500, and Nasdaq for sharp weekly losses.

Investors are also scrutinizing the latest earnings for the next "shoot first, ask questions later" AI scare. Applied Materials  stock surged as much as 10% chip toolmaker's upbeat outlook mirrored robust AI demand. But Pinterest  shares tumbled as much as 20% as revenue fell short and analysts fretted about AI risks to its discovery platform.