Stock Market Slumps: Dow, S&P 500, Nasdaq Struggle Amid AI Concerns

Feb 16, 2026, 2:17 AM

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US stock markets experienced a downturn on Friday, with the Dow Jones Industrial Average (^DJI) gaining only 0.1% while the S&P 500 (^GSPC) managed to stay slightly above the flatline. In contrast, the tech-heavy Nasdaq Composite (^IXIC) dipped by 0.2% as concerns over artificial intelligence disrupted various sectors, resulting in significant losses across the board for the week.

All three major indices—the Dow, S&P 500, and Nasdaq—posted weekly losses, with the Dow and S&P both down more than 1% and the Nasdaq seeing a drop of over 2% during the same period. The backdrop to these declines was a cooler-than-expected inflation reading for January, released by the Bureau of Labor Statistics, which indicated that consumer prices rose 0.2% from the previous month and 2.4% year-over-year.

The implications of this inflation data are significant, as it could influence the Federal Reserve's upcoming decisions on interest rates. Following the report, traders began to adjust their expectations, with a majority now anticipating a quarter-point rate cut in June. Most predictions still suggest two cuts by the end of 2026, but a growing number of traders are factoring in additional reductions, reflecting a shifting landscape in monetary policy.

The market's decline was exacerbated by a day of intense selling, primarily driven by fears surrounding AI's impact on various sectors. Traditional industries such as real estate, logistics, and transportation, previously viewed as safe havens, have not escaped the turmoil. This fear was particularly evident as all seven of the "Magnificent Seven" technology giants saw their stock prices decline sharply, contributing to the overall market slump.

Investors are closely monitoring earnings reports to gauge the market's reaction to AI developments. For instance, Applied Materials (AMAT) saw its stock price soar due to a robust forecast that highlighted strong demand for AI-related products. In stark contrast, Pinterest (PINS) struggled, with shares plummeting after it reported revenue that fell short of expectations, raising concerns about the potential risks AI poses to its discovery platform.

In other earnings news, Rivian (RIVN) shares surged more than 25% following a strong performance in its fourth-quarter earnings, with the electric vehicle manufacturer on track to deliver its R2 midsize model before summer. Additionally, Moderna (MRNA) saw a 10% increase in its stock price after exceeding quarterly revenue estimates, largely attributed to steady sales of its COVID-19 vaccine.

As the market continues to react to these developments, investors remain cautious ahead of the next inflation report, which could further influence market sentiment and Federal Reserve policy. The interplay of AI advancements and traditional sectors is creating a complex environment that traders are keenly observing as they navigate this uncertain landscape.

With the volatility in tech stocks and the implications of inflation data looming, the coming weeks will be crucial for investors trying to make sense of the ongoing shifts in the market landscape. The balance between embracing AI innovations and safeguarding against their potential disruptions remains a key focus for market participants moving forward.

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