Fourth-quarter GDP rose at an annualized 1.4%. Economists had expected 2.8%. Only a few months ago, growth was running above 4%. Consumer spending, the engine of the American economy, increased at a 2.4% pace. 

But the most awaited indicator was inflation data. The core Personal Consumption Expenditures index, the Federal Reserve's preferred gauge, rose 3.0% year over year in December, slightly above expectations. On a monthly basis, it climbed 0.4%, hotter than forecast. Futures on Wall Street fell deeper in the red after the publication of these statistics.

In short, growth cooled more than expected, inflation did not: that combination is uncomfortable. For months, markets have clung to the idea of a soft landing, slower growth but with inflation drifting steadily toward the Fed's 2% target. Today's data complicates that narrative. The economy appears to be decelerating faster than anticipated, yet price pressures remain sticky.

This is the scenario central bankers like least. Slower growth limits how restrictive policy can be. Persistent inflation limits how quickly rates can fall. It narrows the Fed's room to maneuver.

The minutes from the Fed's last meeting already showed officials in no hurry to cut rates. Some even floated the possibility of hiking again if inflation stalls. After today's numbers, that caution will only harden. The much discussed rate cuts of 2026 may arrive later, and more grudgingly, than markets had hoped.

Meanwhile, Washington continues to expand its military presence in the Middle East. Donald Trump has given Iran 10 to 15 days to respond to U.S. demands over its nuclear program, and reports suggest the White House is weighing a limited strike to force negotiations. Oil prices have responded accordingly, with Brent crude near $72 a barrel and up sharply this week.

Higher oil prices are a gift to energy stocks, which have led the S&P 500 recently. But they are also a tax on consumers and a complication for the Fed. When inflation is already running hotter than expected, rising energy costs are the last thing policymakers want.

In other news, private equity stocks sold off after Blue Owl Capital said it would liquidate $1.4 billion in assets to meet investor redemptions. That announcement rattled a sector that has marketed itself as sturdy and dependable. Blackstone and Apollo fell sharply. Apple and Walmart also slid, adding to the unease.

Technology shares, already under pressure, remain vulnerable. Investors are increasingly questioning whether massive spending on artificial intelligence will deliver returns quickly enough to justify lofty valuations. This morning's weaker growth data may reinforce that skepticism. Slower economic expansion makes it harder to grow into high valuations. It also raises questions about whether corporate earnings expectations, still broadly optimistic, are too generous.

Another uncertainty hangs over Washington. The Supreme Court may rule soon on the legality of Trump's emergency tariffs. If struck down, more than $175 billion in tariff revenue could need to be refunded, according to the Penn Wharton Budget Model. That would ripple through the dollar and Treasury markets and inject yet another variable into an already complex policy mix.

Today's economic highlights:

On today's agenda: Manufacturing and Services PMIs in Japan; Retail Sales and PMIs in the United Kingdom; in Germany, PPI and PMIs; in France, PMIs; in the Euro Area, PMIs; in Canada, Retail Sales; in the United States, GDP, PCE Price Index, Personal Income and Spending, New Home Sales, PMIs, and Bostic's speech. See the full calendar here.

  • Dollar index: 97,890
  • Gold: $5,035
  • Crude Oil (BRENT): $71.26 (WTI) $66.00
  • United States 10 years: 4.07%
  • BITCOIN: $68,010

In corporate news:

  • Nvidia is reportedly close to investing $30 billion in OpenAI as part of a funding round that could raise over $100 billion and value the AI company at about $830 billion.
  • Seagate Technology exchanged $600 million of its unit's 3.5% senior notes due 2028 for roughly $599.2 million in cash and about 5.95 million shares.
  • France's private sector remained in contraction in February, with PMI data showing weak demand and shrinking new business.
  • Germany's private sector growth accelerated to a four-month high in February, with manufacturing returning to expansion and services strengthening.
  • AppLovin plans to build its own social media platform after its failed bid to acquire TikTok assets outside China.
  • Amazon Web Services experienced two outages in December linked to configuration errors involving internal AI tools, according to the Financial Times.
  • JPMorgan Chase is in talks to provide financial services for President Trump's proposed Board of Peace initiative for Gaza, the Financial Times reported.
  • BioNTech has sued Moderna in the U.S. for allegedly infringing its patented mRNA technology used in COVID-19 vaccines.
  • UBS raised its 2026 forecast for U.S. tech investment-grade bond issuance to $360 billion, citing increased AI-driven spending by major technology firms.
  • Apollo Global Management invested $1 billion in hybrid notes issued by Aldar Properties, bringing its total commitments to the UAE developer to $2.9 billion.
  • AbbVie said the U.S. FDA approved its Venclexta combination therapy with acalabrutinib for certain previously untreated chronic lymphocytic leukemia patients.
  • U.S. regulators said General Motors is recalling 43,732 vehicles due to a rear-wheel lock-up risk that could increase the chance of a crash.
  • Tesla introduced a cheaper $59,990 dual-motor Cybertruck variant and cut the price of its Cyberbeast model to boost demand.
  • Tata Consultancy Services and Cisco launched a new center of excellence focused on developing autonomous enterprise solutions.
  • Amazon surpassed Walmart in annual revenue to become America's largest company by sales.
  • Amazon's AWS experienced multiple outages in December due to AI coding tool errors.
  • Walmart CEO projects FY net sales growth of 3.5%-4.5%, below expectations.
  • Walgreens to lay off over 600 employees as part of cost-cutting measures.
  • Boeing faces criticism from NASA for Starliner mission failures.
  • AMD backs $300 million loan guarantee for Crusoe's AI chip purchase.

Analyst Recommendations:

  • American Electric Power Company, Inc.: Jefferies upgrades to buy from hold and raises the target price from USD 128 to USD 150.
  • At&T Inc.: Morgan Stanley resumes coverage with an upgrade to overweight with a price target raised from USD 22 to USD 30.
  • Etsy, Inc.: Barclays upgrades to overweight from equalweight with a price target raised from USD 62 to USD 72.
  • Newmont Corporation: Morgans Financial Limited downgrades to accumulate from buy and reduces the target price from AUD 190 to AUD 187.
  • Reliance, Inc.: BMO Capital Markets downgrades to market perform from outperform and reduces the target price from USD 340 to USD 320.
  • Southern Company: Wells Fargo upgrades to market weight from underweight and raises the target price from USD 84 to USD 96.
  • Walmart Inc.: HSBC downgrades to hold from buy and raises the target price from USD 122 to USD 131.
  • Wayfair Inc.: Gordon Haskett downgrades to hold from buy and reduces the target price from USD 110 to USD 80.
  • Yeti Holdings, Inc.: B Riley Securities Inc. upgrades to buy from neutral with a price target raised from USD 35 to USD 54.
  • Alphabet Inc.: Tigress Financial Partners maintains its strong buy recommendation and raises the target price from USD 280 to USD 415.
  • Applied Materials, Inc.: Daiwa Securities maintains its neutral recommendation and raises the target price from USD 265 to USD 390.
  • Bristol-Myers Squibb Company: Daiwa Securities maintains its neutral recommendation and raises the target price from USD 43 to USD 62.
  • Coinbase Global, Inc.: Compass Point Research & Trading maintains its sell recommendation and reduces the target price from USD 190 to USD 140.
  • Corning Incorporated: UBS maintains its buy recommendation and raises the target price from USD 125 to USD 160.
  • Deere & Company: Baird maintains its neutral recommendation and raises the target price from USD 467 to USD 675.
  • Epam Systems, Inc.: Citi maintains its neutral recommendation and reduces the target price from USD 225 to USD 155.
  • Iqvia Holdings Inc.: Zacks maintains its neutral recommendation and reduces the target price from USD 256 to USD 177.
  • Quanta Services, Inc.: B Riley Securities Inc. maintains its neutral recommendation and raises the target price from USD 450 to USD 565.
  • Sportradar Group Ag: Roth Capital Partners maintains its buy recommendation and reduces the target price from USD 37 to USD 25.
  • Sprouts Farmers Market, Inc.: BMO Capital Markets maintains its market perform recommendation and reduces the target price from USD 90 to USD 70.
  • Stellantis N.v.: Goldman Sachs maintains its neutral recommendation and reduces the target price from EUR 9 to EUR 7.
  • Veeva Systems Inc.: UBS maintains its neutral recommendation and reduces the target price from USD 280 to USD 200.
  • Vertiv Holdings Co: Baptista Research maintains its hold recommendation and raises the target price from USD 208 to USD 274.20.
  • Workday Inc.: TD Cowen maintains its buy recommendation and reduces the target price from USD 280 to USD 200.
  • Zscaler, Inc.: JP Morgan maintains its overweight recommendation and reduces the target price from USD 354 to USD 267.