Last week, market volatility was primarily driven by concerns surrounding artificial intelligence. Stocks in sectors such as software, real estate, financial services, and logistics faced widespread selling pressure due to fears about AI's disruptive impact on business models.

On Friday, the technology-heavy Nasdaq Composite Index (^IXIC) declined 0.2%, bringing its weekly loss to 2.1%. The S&P 500 (^GSPC) edged up less than 0.1% on Friday but still finished the week down 1.4%. The Dow Jones Industrial Average (^DJI) rose 0.1% on Friday, resulting in a 1.2% weekly decline.

These index-level movements masked significant turbulence within individual sectors. Whether this AI-driven volatility will persist is a key focus for investors this week.

This Week's Schedule The highlight of this week's economic calendar is Friday's Personal Consumption Expenditures (PCE) report. This data will reflect consumer spending during the holiday-heavy month of December and provide the latest inflation reading. Ahead of this release, January's Consumer Price Index (CPI) showed inflation cooling more than anticipated.

Also on Friday, investors will review the University of Michigan Consumer Sentiment Index, a key gauge of whether consumer mood aligns with actual spending data. Earlier this month, this indicator rose to its highest level since last August, though it remains below year-ago levels.

On the corporate front, market attention is likely to center on Wal-Mart's (WMT) fourth-quarter earnings report on Thursday. As a major barometer of consumer spending, Wal-Mart's results will also mark the first earnings presentation by its new CEO.

Other notable earnings reports this week include DoorDash (DASH) and Molson Coors Beverage (TAP) on Wednesday. Additionally, several companies whose results may reflect how AI's electricity demands are reshaping the energy sector will report, including Constellation Energy (CEG), Energy Transfer (ET), and Southern Company (SO).

U.S. markets are closed on Monday for the Presidents' Day holiday.

"Sell First, Ask Questions Later" The sell-off initially hit software stocks before spreading to financial services, retail, and finally logistics. A sharp decline beginning in early February first battered software leaders like Salesforce (CRM) and ServiceNow (NOW), then spread contagiously across sectors—any stock with perceived vulnerability to AI disruption faced heavy selling.

This week, an announcement from a company formerly known for karaoke machines, introducing a new AI logistics platform that purportedly enables businesses to "increase freight volume by 300%-400% without corresponding increases in staff," triggered significant declines. CH Robinson (CHRW) and Universal Logistics (ULH) fell 12% and 10%, respectively, during the week.

Jefferies analyst Jeff Faucette wrote in a February 12 client note, "The current market dynamic, not just in tech but across nearly all sectors, is to sell first and ask questions later whenever AI is mentioned."

Major technology stocks also faced selling pressure. NVIDIA (NVDA), Alphabet (GOOGL, GOOG), and Amazon.com (AMZN) all closed lower on Friday, despite maintaining strong spending outlooks.

UBS strategist Matthew Mish noted, "February's AI-driven sell-off reflects a genuine market belief that AI-powered transformation will not only accelerate disruption in software but will also spread to many other sectors." He added, "The exact timing of AI's impact remains unclear, and this cloud of uncertainty is unlikely to lift soon."

Software stocks remained a primary target. AppLovin (APP) fell 18% on disappointing earnings, while Pinterest (PINS) dropped 21%.

"All Things Have Their Flaws" On Wednesday, the U.S. Bureau of Labor Statistics reported a surprising addition of 130,000 jobs in January, double economists' forecasts, delighting Wall Street and Main Street alike. Friday's CPI data showed inflation cooling more than expected, with the core CPI reading, excluding food and energy, rising at its slowest annual pace since December 2021.

However, Deutsche Bank analysts wrote on Friday, "All things have their flaws," pointing out imperfections in the economic data. For instance, while January job growth exceeded expectations, revisions lowered total 2025 job additions by 400,000, reducing the average monthly gain to just about 15,000.

BNP Paribas analyst Gaston Dimant highlighted that the CPI components which surprised to the upside—non-auto goods and non-housing services—are precisely the areas most critical for determining inflation's persistence.

Janus Henderson Investors' Global Head of Securitized Products, John Kirschner, suggested these signals indicate interest rates are likely to remain unchanged until the end of Federal Reserve Chair Jerome Powell's term. He wrote, "Looking ahead, as we await new direction under a potential Kevin Warsh-led Fed, a combination of relatively strong growth, stimulus from large tax refunds, an improving labor market, and persistently cooling inflation should keep rates stable."

As of Friday afternoon, traders priced in a slightly greater than 50% probability of a 25-basis-point rate cut by the Fed in June, which would lower the target rate to a 3.25%-3.5% range. Chair Powell's term concludes in May.

This Week's Economic and Earnings Calendar Monday Economic Data: None Earnings: BHP Group (BHP), Sonoco Products (SON), Otter Tail Corporation (OTTR), ReNew Energy (RNW)

Tuesday Economic Data: ADP Employment Report, NY Empire State Manufacturing Index, NAHB Housing Market Index Earnings: Medtronic (MDT), Palo Alto Networks (PANW), Constellation Energy (CEG), Cadence Design Systems (CDNS), Republic Services (RSG), Energy Transfer (ET), Vulcan Materials (VMC), EQT (EQT), Kenvue (KVUE), DTE Energy (DTE), FirstEnergy (FE), Devon Energy (DVN), among others

Wednesday Economic Data: Mortgage Applications, Durable Goods Orders (Advance), Housing Starts, Industrial Production (January), FOMC Meeting Minutes (January 28) Earnings: Analog Devices (ADI), Booking Holdings (BKNG), Lloyds Banking Group (LYG), CRH (CRH), Moody's (MCO), Carvana (CVNA), DoorDash (DASH), Occidental Petroleum (OXY), Kinross Gold (KGC), Garmin (GRMN), eBay (EBAY), Nutrien (NTR), among others

Thursday Economic Data: Philadelphia Fed Manufacturing Index, Initial Jobless Claims, Continuing Claims Earnings: Wal-Mart (WMT), Rio Tinto (RIO), Deere & Company (DE), Newmont Corporation (NEM), Southern Company (SO), Quanta Services (PWR), Targa Resources (TRGP), among others

Friday Economic Data: PCE Price Index (December), Core PCE Price Index, S&P Global US Manufacturing PMI (Flash), S&P Global US Services PMI (Flash), University of Michigan Consumer Sentiment (Final) Earnings: AngloGold Ashanti (AU), PPL Corporation (PPL), Lamar Advertising (LAMR), Sibanye Stillwater (SBSW), Hudson Bay Mining (HBM), Portland General Electric (POR), among others