NEW YORK (AP) — U.S. stocks are drifting Friday after discouraging reports showing slowing growth for the economy and faster inflation created relatively few ripples in the market.
The S&P 500 added 0.1% after flipping earlier between small gains and losses. The Dow Jones Industrial Average was down 19 points, or less than 0.1%, as of 9:59 a.m. Eastern time, and the Nasdaq composite was 0.2% higher.
Treasury yields also did not move much in the bond market following the economic reports. Both updates were certainly disappointing, and they underscored the tricky situation the Federal Reserve faces as it sets interest rates, but they did not change traders’ expectations much for what the Fed will ultimately do.
One report said the U.S. economy’s growth slowed to a 1.4% annual rate during the end of 2025. That’s down from a 4.4% burst during the summer and “a bummer of a number,” according to Brian Jacobsen, chief economic strategist at Annex Wealth Management.
The second report said the measure of inflation that the Fed likes to use accelerated to 2.9% in December from 2.8% in November. An underlying measure that economists consider a better predictor of where inflation may be heading quickened to 3% from 2.8%.
What makes things difficult for the Fed is that it has no tool to fix both a slowing economy and high inflation at the same time. It could lower interest rates to give the economy a boost, as it did last year and as President Donald Trump has been demanding, but that would risk worsening inflation.
Fed officials said at their last meeting that they want to see inflation fall further before they would support cutting rates further.
Following the reports, traders are still mostly betting that the Fed will lower rates at least twice by the end of this year, according to data from CME Group. But some shifted the timing for when the cuts could begin to slightly later in the summer.
The yield on the 10-year Treasury edged down to 4.07% from 4.08% late Thursday. The two-year yield, which more closely tracks expectations for Fed action, held at 3.47%, where it was late Thursday.
On Wall Street, Akamai Technologies dropped 10% for one of the market’s sharpest losses. The cybersecurity and cloud computing company reported stronger results for the end of 2025 than analysts expected, but it gave a profit forecast for the upcoming year that fell short of estimates.
Akamai plans to spend a bigger percentage of its revenue this upcoming year on equipment and other investments. It’s the latest potential indicator of how higher prices for computer memory amid shortages created by the AI boom is affecting customers throughout the economy.
On the winning side of the market was Comfort Systems, which rose 5.4% after the provider of heating, ventilation air conditioning and electrical services reported a stronger profit for the latest quarter than analysts expected. CEO Brian Lane said his company is seeing “unprecedented demand.”
In stock markets abroad, indexes rose modestly in Europe following a more mixed finish in Asia.
The Hang Seng fell 1.1% after Hong Kong’s market reopened following Lunar New Year holidays, but South Korea’s Kospi jumped 2.3% to a record, led by major defense contractors like Hanwha Aerospace. The company is one of many benefiting from a ramp up in military spending in many countries.
___
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
