US stocks bounce back as Dow climbs 300 points despite sticky inflation

• Core PCE inflation climbed to 3.1% year-over-year in January, up from 3.0% in December, keeping Federal Reserve rate-cut expectations uncertain
• Q4 2024 GDP growth was revised down significantly to 0.7% from an initial estimate of 1.4%, representing a steep slowdown from the prior quarter's 4.4% growth
• Adobe shares dropped over 8% after CEO Shantanu Narayen's exit announcement, while defense and energy stocks drew continued investor attention amid Middle East tensions

Summary

Market Performance:

US stocks rebounded Friday with the Dow Jones gaining 301 points (0.7%), the S&P 500 rising 0.5%, and the Nasdaq also moving higher. The rally followed easing oil prices and Trump administration assurances that the Strait of Hormuz blockade would be temporary.

Inflation Data:

The Bureau of Economic Analysis released February's PCE data, the Federal Reserve's preferred inflation gauge. Core PCE (excluding food and energy) rose 0.4% monthly and 3.1% year-over-year, up from December's 3.0%. Headline PCE increased 0.3% monthly and 2.8% annually, slightly down from 2.9% in December. The sticky inflation figures maintain uncertainty around potential Fed rate cuts.

Economic Growth:

Revised Q4 2025 GDP showed significant deceleration, expanding just 0.7% annually—down from the initial 1.4% estimate and missing the 1.5% forecast. This marked a sharp slowdown from Q3's 4.4% growth rate.

Notable Stock Movements:

Adobe plunged over 8% in pre-market trading after CEO Shantanu Narayen, who led the company for 18 years, announced his exit plans. Investors reacted negatively to the leadership uncertainty amid intense AI competition. Ulta Beauty also declined sharply due to margin pressure, e-commerce competition, and the ending of its Target partnership royalty revenue stream.

Sector Focus:

Defense stocks continue attracting attention as markets price in prolonged Middle East conflict. Energy companies remained among the week's top performers. Analysts anticipate continued volatility driven by inflation concerns and oil price fluctuations.