Wall Street pulled back on Friday after hitting record highs this week. Fresh inflation data showed prices stayed steady, which kept traders focused on the chances of a Federal Reserve rate cut in September.
The S&P 500 dropped 0.5%, a day after reaching an all-time high, but it’s still on track to finish August with a nearly 2% monthly gain, marking its fourth straight month of growth. The Dow Jones fell 125 points (0.3%), while the Nasdaq slid 0.9% as technology stocks dragged the market down.
Tech companies led the losses:
- Dell Technologies fell almost 10%, even though its revenue beat expectations, due to weak PC demand and lower profit margins.
- Nvidia dropped 2.8%, Broadcom fell 2.7%, and Oracle slid 3.6%.
Meanwhile, some healthcare and other sectors managed to post gains.
On the economic side, the Commerce Department reported that prices in July were 2.6% higher than a year ago, unchanged from June and in line with forecasts. However, core inflation (which leaves out food and energy) rose 2.9%, a bit higher than June’s 2.8%, making it the fastest pace since February.
Even though inflation has come down from its 7% peak three years ago, it’s still above the Fed’s 2% target. Last week, Fed Chair Jerome Powell suggested that a rate cut could happen as soon as September, given signs of a cooling job market.
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According to CME Group data, traders now see an 87% chance of a quarter-point rate cut next month. Lower interest rates generally encourage borrowing and investment but also carry the risk of fueling inflation.
In the bond market, the 10-year Treasury yield inched up to 4.23%, while the 2-year yield stayed at 3.63%.
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Outside the US, European markets mostly slipped, while Asian markets ended mixed.
US markets will be closed on Monday for the Labor Day holiday.
