On Friday, major U.S. stock indices closed higher, with the Dow Jones Industrial Average climbing over 200 points, largely influenced by a significant Supreme Court decision. This ruling, which invalidated certain presidential tariffs based on the International Emergency Economic Powers Act (IEEPA) and separation-of-powers principles, injected a degree of optimism into the market. Despite this positive movement, the CNN Money Fear and Greed index continued to signal a prevailing sense of caution among investors, remaining firmly in the 'Fear' category. The market's performance was also set against a backdrop of mixed economic indicators, including a decelerated GDP growth in the fourth quarter of 2025 and rising inflation as measured by the Personal Consumption Expenditures (PCE) index.
The market's upward trajectory on Friday was a direct consequence of the Supreme Court's landmark judgment. The Court's assertion that the IEEPA does not grant the President the authority to unilaterally impose tariffs underscored the constitutional separation of powers, providing clarity and potentially reducing trade-related uncertainties that had previously weighed on investor confidence. This legal development led to broad-based gains across various sectors within the S&P 500, with consumer discretionary, communication services, and real estate stocks leading the charge. However, not all sectors benefited equally; energy and healthcare stocks experienced a downturn, diverging from the overall market's positive trend.
Simultaneously, recent economic reports painted a nuanced picture. The U.S. Gross Domestic Product (GDP) growth rate for the fourth quarter of 2025 was reported at a modest 1.4% annually. This figure represented a significant slowdown from the previous quarter's 4.4% expansion and fell considerably short of the anticipated 3%. Concurrently, inflation data showed an increase, with the December Personal Consumption Expenditures (PCE) index rising by 0.4% month-over-month, pushing the annual rate to 2.9%. The Core PCE, a key inflation gauge favored by the Federal Reserve, also saw a 0.4% monthly increase, reaching a year-over-year rate of 3%, slightly exceeding projections.
The market's reaction to these events highlights the complex interplay between legal decisions, economic data, and investor psychology. While the Supreme Court's ruling provided a clear impetus for stock market gains, particularly for the Dow, the persistent 'Fear' reading on the CNN Money index suggests that underlying anxieties about economic stability or future uncertainties continue to influence sentiment. This dichotomy between market performance and investor confidence underscores the cautious approach many are still taking amidst evolving economic conditions and policy shifts.
Reflecting on the week's performance, major indices concluded with gains, with the Dow Jones, S&P 500, and Nasdaq Composite all recording increases. The Dow rose by 0.3%, the S&P 500 advanced by 1.1%, and the technology-heavy Nasdaq climbed 1.5%. These weekly gains indicate a resilient market, albeit one that remains sensitive to both impactful legal rulings and ongoing economic assessments. The 'Fear & Greed Index' itself, calculated from seven equally weighted indicators, serves as a barometer of market sentiment, with its current position in the 'Fear' zone suggesting that despite recent rallies, a significant level of investor apprehension persists, emphasizing the delicate balance between market opportunities and potential risks.