Wall Street finished August with gains, but stocks declined Friday as the market retreated from recent record highs. The S&P 500 dropped 0.6% after reaching a new peak the previous day, though it still ended the month up 1.9%, marking its fourth consecutive monthly increase and bringing its year-to-date gain to 9.8%.
The Dow Jones Industrial Average also fell, down 0.2% from its own record high, while the Nasdaq composite closed 1.2% lower.
Sam Stovall, chief investment strategist at CFRA, said, “The reason the market is down today is primarily because we are heading into a long weekend, and a lot of traders don’t like to have a hefty exposure over a long weekend because of the news that could come out and take them by surprise.”
Mixed economic reports contributed to the pullback as traders locked in profits after a week of milestones for major indexes. Inflation data showed prices held steady last month according to the Commerce Department’s personal consumption expenditures index, which reported an annual rise of 2.6% in July—matching June’s rate and economist expectations. Excluding food and energy costs, core inflation ticked up to 2.9% from last year, slightly higher than June.
Although inflation remains below its peak from three years ago when it neared 7%, it continues above the Federal Reserve’s target of 2%. However, Fed Chair Jerome Powell indicated last week that an interest rate cut may be considered at next month’s meeting due to signs of labor market weakness.
Recent government figures show hiring has slowed significantly since spring.
Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management noted: “Today’s in-line PCE Price Index will keep the focus on the jobs market… For now, the odds still favor a September cut.”
Market expectations suggest an approximately 87% chance that policymakers will reduce rates by a quarter-point at their upcoming meeting, based on CME Group data.
Lower interest rates can stimulate both investments and economic activity by reducing borrowing costs but carry risks of increased inflation.
On Friday technology stocks weighed on indexes despite some sector gains elsewhere. Dell Technologies led losses among S&P 500 companies with shares down nearly 9% following second-quarter results that exceeded forecasts but highlighted margin pressures and weaker PC sales. Nvidia declined by more than 3%, Broadcom was off by nearly 4%, and Oracle slid almost 6%.
Ulta Beauty dropped over 7% even after posting quarterly results above analyst projections; Marvell Technology tumbled about 19% after issuing disappointing guidance for its third quarter.
In contrast Petco Health & Wellness surged more than 23%, while Autodesk rose over 9%, both buoyed by better-than-expected earnings reports.
Consumer sentiment deteriorated this month according to University of Michigan survey results—the lowest reading since May—as concerns about prices and broader economic conditions intensified among Americans.
Treasury yields were mixed; yields on benchmark ten-year notes rose slightly while two-year yields edged down.
Before its next policy decision Federal Reserve officials will review additional inflation data including producer price index (PPI) and consumer price index (CPI) readings; Chris Zaccarelli, chief investment officer at Northlight Asset Management commented that unless those measures show substantial increases “the Fed is ‘almost guaranteed’ to cut interest rates next month.”
European stock markets ended mostly lower Friday while Asian exchanges closed mixed.
