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[US GDP and PCE Data Show Contradictory Trends, Stock Index Futures Plunge] ⑴ A combination of a significant downward revision to US Q4 GDP and a stronger-than-expected rise in December's core PCE pressured stock index futures downward on Friday. As of 8:34 AM ET, S&P 500 futures were down 0.28%, Nasdaq 100 futures were down 0.39%, and Dow Jones futures were down 0.23%. ⑵ Growth data was significantly weaker than expected. The Commerce Department report showed that Q4 real GDP grew at an annualized rate of only 1.4%, far below market expectations of 3.0% and a significant drop from Q3's 4.4%. The record 43-day government shutdown was a major drag, with federal spending falling at its fastest pace since 1972. ⑶ Inflation data, however, unexpectedly rose. The Fed's preferred inflation gauge—the December personal consumption expenditures index—rose 0.4% month-over-month, higher than the expected 0.3%. Core PCE, excluding food and energy, also rose 0.4% month-over-month, exceeding market expectations. On the annualized front, core PCE rose to 3%, a new high since February 2025. (4) This data combination sends a complex signal to the market. Slower economic growth typically favors expectations of interest rate cuts, but rising inflation diminishes the urgency for the Federal Reserve to ease policy. The interplay of these two forces caused stock index futures to react downwards after the data release, reflecting that market concerns about stagflation outweigh expectations of interest rate cuts. (5) Investors will reassess the Federal Reserve's policy path. Higher-than-expected inflation may make policymakers more cautious in their assessment of the timing of interest rate cuts in 2026, while slower growth increases the risk of policy missteps. The interest rate futures market will repric this, and volatility is expected to amplify further in subsequent trading.