Stocks were lower on Wall Street, erasing the S&P 500’s gains for the week. The S&P 500 fell 0.4% on Friday but remains near the record high it set last week. The Nasdaq composite fell 0.7% and the Dow fell 0.1%. Nike fell 20% after the footwear and athletic apparel company missed Wall Street’s revenue targets and cut its full-year sales guidance. Company executives said they expect sales to fall by single digits in the current fiscal year, citing a “challenging” environment. Treasury yields were mixed in the bond market after a closely watched report showed inflation continuing to ease.
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Stocks on Wall Street gave up early gains and were lower in afternoon trading on Friday after a closely watched report showed inflation continues to moderate.
Investors are hoping that cooling inflation will prompt the Federal Reserve to start cutting interest rates, which remain at the highest level in more than 20 years.
The S&P 500 fell 0.3%, hovering around its all-time high. The benchmark index remains within striking distance of posting a fourth straight weekly gain. The Nasdaq composite fell 0.3% and is hovering around its all-time high.
The Dow Jones Industrial Average was down 152 points, or 0.4%, as of 3:15 pm Eastern.
Consumer prices rose 2.6% in May from a year earlier, according to the latest index of personal consumption expenditures, or PCE. This signaled continued easing from a reading of 2.7% in April and is significantly lower than the peak reading of 7.1% two years ago.
“It’s moving in the right direction and that’s what the Fed needs to make a decision to cut rates,” said Quincy Krosby, chief global strategist for LPL Financial.
PCE is the Fed’s preferred gauge of inflation, and the latest reading is encouraging for economists and investors hoping for rate cuts to help ease pressure on the market and borrowers. Wall Street is betting that the Fed will start cutting interest rates at its September meeting.
Treasury yields were mixed in the bond market, having initially lost ground following the latest sign of easing inflation. The yield on the 10-year Treasury, which affects interest rates on mortgages and other consumer loans, rose to 4.35% from 4.30% shortly before the release of the PCE data. The two-year Treasury yield, which more closely tracks expectations for Fed action, was steady at 4.72% shortly before the data release.
The Fed raised interest rates to the highest level in more than two decades in an effort to ease inflation back to its 2% target. Other measures of inflation, including the well-known consumer price index, have also confirmed that pressure on prices has been easing.
Consumers continue to feel pressure from inflation, despite significant easing from its peak, and recent data has shown that spending is weakening and weighing on economic growth. The Fed’s goal was to slow economic growth enough to reduce inflation, but not so much that the economy slips into a recession.
“This combination of lower inflation and consumers being much more cautious with their spending patterns allows the market to see the possibility of a rate cut in September,” Krosby said.
The strong job market has been another major factor driving economic growth, but it has also shown signs of weakening. Wall Street will get updates on job openings, unemployment and employment next week.
Nike fell 20.7% for the biggest drop among S&P 500 stocks after the footwear and athletic apparel company missed Wall Street’s revenue targets and cut its full-year sales guidance. Company executives said they expect sales to fall by single digits in the current fiscal year, citing a “challenging” environment.
Nike’s bleak outlook dragged other athletic apparel companies along. Foot Locker fell 3.5%, Skechers lost 1.2% and Under Armor fell 3.1%.
More retailers, particularly those focusing on discretionary items, have warned of a slowdown in consumer spending. Consumers barely increased spending in May from April, according to the latest government retail sales report.
Gains in technology and financial sector stocks helped limit the pullback in the S&P 500. Salesforce rose 2% and JPMorgan Chase rose 1.3%.
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AP Business writers Yuri Kageyama and Matt Ott contributed to this report.