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Last Updated: 27-Feb-26 09:08 ET | Archive
A rift in the market
Briefing.com Summary:
*A large job cut announcement from Block has stirred AI disruption concerns.
*The January Producer Price Index did not bring good inflation news.
*Amazon.com and NVIDIA are making large investments in OpenAI.
The Jackson 5 sang about love, saying it was "A, B, C, easy as one, two, three, as simple as do, re, mi." Love, of course, isn't always sing-songy, and that is true for the stock market this morning, which is having some relationship problems with AI that stem from the other end of the alphabet.
Specifically, Block, with the ticker symbol XYZ, has announced that AI made it as easy as one, two, three to cut 40% of its workforce. That was the discordant lyric coming out of its earnings report last night, which included the layoff news that stemmed from the company's conclusion that it sees an "...opportunity to move faster with smaller, highly talented teams using AI to automate more work."
Block won't be the last company making this type of announcement, which is what has the market spooked this morning about growth prospects.
Those concerns are manifesting themselves in follow-through selling of stocks and sliding Treasury yields. The 10-yr note yield has dropped below 4.00%, but that move isn't as simple as do, re, mi. If it were, we'd see an equity futures market trading with a positive disposition, but that isn't the case.
Currently, the S&P 500 futures are down 59 points and are trading 0.9% below fair value, the Nasdaq 100 futures are down 235 points and are trading 1.1% below fair value, and the Dow Jones Industrial Average futures are down 522 points and are trading 1.1% below fair value.
Not only has Block's news caused some problems, but so have the mega-cap stocks. They are weak again on follow-through selling and festering jitters about aggressive spending/investment that were heightened today by the confirmation that NVIDIA (NVDA) and Amazon.com (AMZN) will be investing $30 billion and $50 billion, respectively, in OpenAI.
The Producer Price Index for January, meanwhile, was another problem.
Briefly, the Producer Price Index for final demand increased 0.5% month-over-month (Briefing.com consensus: 0.3%) following a downwardly revised 0.4% increase (from 0.5%) in December. The Producer Price Index for final demand, excluding food and energy, surged 0.8% month-over-month (Briefing.com consensus: 0.3%) following a 0.6% increase in December.
The Producer Price Index for final demand was up 2.9% year-over-year, versus 3.0% in December, but the Producer Price Index for final demand, excluding food and energy, was up 3.6%, versus 3.3% in December.
The key takeaway from the report was rooted in the worrying core-PPI component, as that will foment concerns about pass-through to consumer prices that will likely keep the Fed leery about cutting rates soon.
Interestingly, the Treasury market handled the inflation disappointment quite well. The 10-yr note yield remains below 4.00% at 3.98%. But, again, that seeming calmness belies a sense of angst about growth prospects and geopolitics, with the U.S. and Iran still unable to reach an agreement, and job displacement stemming from AI advancements.
There is a rift in the market this morning, then, that is as easy as AI, as troublesome as PPI, and as hard as XYZ.
