Asian stocks advance ahead of US inflation report

Wall Street stocks gave up early gains and finished lower on Friday, snapping a three-week winning streak for the S&P 500.

A wave of late-day selling sent the benchmark index down 0.4% and into the red for the week. The Nasdaq Composite fell 0.7%, while the Dow Jones Industrial Average ended down 0.1%.

Despite a pessimistic end, the S&P 500 and the Nasdaq remain close to their historical highs.

The decline in major technology stocks, which were the big winners from the record market rise, weighed on the market. Apple fell 1.6%, Microsoft lost 1.3% and Meta Platforms finished down 3%.

The late afternoon burst of selling could be because traders took profits while the market was near all-time highs, or because they rebalanced their portfolios at the end of the second quarter. quarter, said Ross Mayfield, investment strategy analyst at Baird.

“I wouldn’t be surprised at all if there was some profit-taking today, especially from the stocks that have really rallied,” Mayfield said. “That may be why we’re seeing a little bit of additional weakness from the big tech companies relative to the rest of the market.”

The market rose early following a closely watched report that showed inflation continues to fall. Investors 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.

According to the latest Personal Consumption Expenditure (PCE) index, consumer prices rose 2.6% in May from a year earlier. This figure marks a continued decline from the 2.7% level recorded in April and is significantly lower than the peak of 7.1% recorded two years ago.

This is moving 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.

The PCE is the Fed’s preferred gauge of inflation, and the latest numbers are encouraging for economists and investors hoping the rate cuts will help ease pressure on the market and borrowers. Wall Street is betting the Fed will start cutting interest rates at its September meeting.

Treasury yields rose in the bond market after initially losing ground following the latest signal of slowing inflation. The yield on the 10-year Treasury, 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 the Fed's actions, 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 falling 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 be informed next week about job openings, unemployment and hiring.

Nike fell 20%, the biggest drop among S&P 500 stocks after the athletic footwear and apparel company missed Wall Street revenue targets and cut its sales forecast for the whole year. Company executives said they expected a single-digit sales decline in the current fiscal year, citing a challenging environment.

Nike's dour outlook has dragged other sportswear companies down with it. Foot Locker fell 2.4%, Skechers lost 1% and Under Armor 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.

In total, 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.

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AP Business writers Yuri Kageyama and Matt Ott contributed to this report.