Wall Street stocks gave up early gains and finished lower on Friday, snapping a three-week winning streak for the S&P 500.
A flurry of late-day selling sent the benchmark index down 0.4% and putting it in the red for the week. The Nasdaq Composite fell 0.7%, while the Dow Jones Industrial Average finished down 0.1%.
Despite a gloomy end to the season, the S&P 500 and the Nasdaq remain close to their historic highs.
The decline in big technology stocks, which were the big winners in the market's record rally, weighed on the market. Apple fell 1.6%, Microsoft lost 1.3% and Meta Platforms ended down 3%.
The late afternoon burst of selling could be due to traders taking profits as the market nears all-time highs or rebalancing their portfolios at the end of the second quarter, said Ross Mayfield, an investment strategy analyst at Baird.
“It wouldn’t surprise me at all if there was some profit-taking today, particularly in the stocks that have really rallied,” Mayfield said. That may be why we’re seeing a little bit of additional weakness in big tech relative to the rest of the market.
The market rose early on a closely watched report that showed inflation continues to fallInvestors are hoping that slowing inflation will prompt the Federal Reserve to start cutting interest rates, which remain at their highest level in more than 20 years.
Consumer prices rose 2.6% in May from a year ago, according to the latest index of personal consumption expenditures, or PCE. This reflects continued easing from the 2.7% figure recorded in April and is significantly lower than the peak of 7.1% recorded two years ago.
This is a step in the right direction and is what the Fed needs to make the decision to cut rates, said Quincy Krosby, chief global strategist at LPL Financial.
PCE is the Fed's preferred gauge of inflation and the latest figures are encouraging for economists and investors who hope the rate cuts will help ease pressure on the market and borrowers. Wall Street is betting that the Fed will begin cutting interest rates at its September meeting.
Treasury yields rose in the bond market after initially losing ground on the latest signal of slowing inflation. The yield on the 10-year Treasury note, which influences interest rates on mortgages and other consumer loans, rose to 4.38% from 4.30% just before the PCE data was released. The yield on the two-year Treasury note, which more closely tracks expectations for Fed action, rose to 4.74% from 4.72% just before the data was released.
The Fed raised interest rates to their highest level in more than two decades to bring inflation back to its 2% target. Other measures of inflation, including the popular Consumer Price Index, have also confirmed that price pressure has eased.
Consumers are still feeling the pressure of inflation, despite the significant slowdown from its peak, and recent data have shown that spending is weakening and weighing on economic growth. The Fed's goal was to slow economic growth enough to curb inflation, but not so much that the economy falls into a recession.
This combination of lower inflation and consumers being much more cautious in their spending habits has the market pricing in the possibility of a rate cut in September, Krosby said.
The strength of the jobs market has been another important factor in economic growth, but it has also shown signs of weakening. Wall Street will receive updates next week on job openings, unemployment and hiring.
Nike fell 20%, the biggest drop among S&P 500 stocks, after the athletic shoe and apparel maker missed Wall Street revenue targets and cut its sales forecast for the entire exercise. Company executives said they expected a single-digit sales decline in the current fiscal year, citing a challenging environment.
Nike's gloomy outlook dragged other sportswear brands down with it. Foot Locker fell 2.4%, Skechers lost 1% and Under Armour fell 2.6%.
More retailers, particularly those focused on discretionary items, are warning of a slowdown in consumer spending. Consumers barely increased their spending in May compared to April, according to the latest government retail sales report.
Gains in financial sector stocks helped limit the S&P 500's decline. JPMorgan Chase rose 1.6% and Wells Fargo closed up 3.4%.
The S&P 500 Index closed its final trading day of June up 3.5% for the month. The index is up about 14.5% since the start of the year.
The Nasdaq gained about 6% for the month and is up 18.1% this year.
Overall, the S&P 500 lost 22.39 points to 5,460.48 points. The Dow Jones lost 45.20 points to 39,118.86 points. The Nasdaq lost 126.08 points to close at 17,732.60 points.
AP Business Writers Yuri Kageyama and Matt Ott contributed to this report.
