NEW YORK: U.S. stocks retreated Friday as investors locked in profits heading into a long weekend, following a record-setting week for the S&P 500 and strong earnings from Nvidia. The pullback came amid fresh inflation data that signaled persistent pricing pressures.
The S&P 500 fell 0.7%, while the Nasdaq Composite dropped 1.2%. The Dow Jones Industrial Average lost 123 points, or 0.3%. Despite the declines, all three indexes remain on track to close August with solid gains, marking the S&P 500’s fourth consecutive winning month.
The latest reading of the core Personal Consumption Expenditures (PCE) Price Index—closely watched by the Federal Reserve—rose 2.9% in July, matching expectations but accelerating from June. It marked the highest level since February, underscoring inflation’s lingering grip on the economy.
“The Fed opened the door to rate cuts, but the size of that opening is going to depend on whether labor-market weakness continues to look like a bigger risk than rising inflation,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
Ross Mayfield, investment strategist at Baird, said the market’s dip was more about timing than fundamentals. “The PCE number was fine, but there’s a bit of an earnings overhang and maybe just a little profit-taking after hitting an all-time high,” he told CNBC.
The S&P 500 recently closed above the 6,500 mark for the first time, a milestone that capped a strong August performance. The Dow has gained roughly 3% this month, while the Nasdaq is up more than 1%.
Still, investors are wary of September, historically the weakest month for equities. According to The Stock Trader’s Almanac, the S&P 500, Dow, and Nasdaq have consistently posted losses in September since 1950, with the broad index averaging a 0.7% decline over the past decade.