Stocks were lower on Friday as investors digested inflation data that matched expectations and looked ahead to the Labor Day weekend.
The Dow fell 187 points, or 0.41%. The broader S&P 500 fell 0.73% and the tech-heavy Nasdaq Composite slid 1.17%.
The major indexes pulled back slightly after notching three consecutive days of gains. The Dow and S&P 500 on Thursday hit record highs.
Stock were lower Friday morning as data showed the Personal Consumption Expenditures index rose 2.6% year-over-year in July, in line with expectations.
The Federal Reserve’s preferred inflation gauge — a core measure of PCE that strips out volatile food and energy prices — rose 2.9% year-over-year in July. It’s the hottest annual pace since February but was also in line with expectations.
“Inflation is increasing ever so slightly, but right in line with forecasts,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in an email.
Tech and artificial intelligence stocks also dragged the market lower. Nvidia (NVDA) sank 3.1%. Marvell Technology (MRVL), another semiconductor company, plunged 16% after reporting earnings that didn’t impress Wall Street.
“Expectations for tech are sky high. The companies have done well, but not necessarily well enough to get them to move to the next level,” Jay Hatfield, chief executive at Infrastructure Capital Advisors, said.
A wild month
US stocks are set to end August on a relatively quiet note. But it’s been another wild month for markets.
Traders have braced a barrage of headlines, from a weaker-than-expected jobs report, to the implementation of President Donald Trump’s widespread tariffs, to his administration’s attempts to oust Federal Reserve Governor Lisa Cook.
And, through it all, stocks have continued to steadily rise, buoyed by hopes for Fed rate cuts, better-than-expected corporate earnings and slowing but stubborn confidence that an AI boom might reap big rewards for investors.
“Earnings were strong, but AI-related growth outlooks showed deceleration,” analysts at Citi said in a note. “All in, stocks have not broken but have clearly lost some momentum. To be fair, the breakneck pace of gains off April lows couldn’t continue forever.”
About 98% of the companies in the S&P 500 have reported second-quarter earnings, with 81% of those companies beating Wall Street’s earnings expectations, according to FactSet data.
“The US stock market is at an all-time high, thanks in part to rapid earnings growth and expectations for that to continue,” James Reilly, senior markets economist at Capital Economics, said in a note.
Fed Chair Jerome Powell delivered remarks at a central banking forum in Jackson Hole, Wyoming, last week that hinted potential rate cuts could be on the horizon.
While Powell’s remarks signaled concerns about a slowing labor market, investors and traders have been ecstatic about the potential for lower borrowing costs.
The Russell 2000, an index tracking smaller companies that are more sensitive to rates, soared roughly 7% this month as investors adjusted to the prospect of rate cuts as soon as September.
Meanwhile, Wall Street’s fear gauge, the CBOE Volatility Index, is trading near its lowest levels of the year, signaling relative calm and confidence in markets.
S&P, Dow on pace for four consecutive months of gains
While stocks dipped lower on Friday, the S&P 500 and Dow are on track for four months of gains in a row.
The S&P 500 has gained every week of August, which is the first time this year that the index has risen each week in a given month.
The S&P 500 on Thursday closed above 6,500 points for the first time ever. It was the benchmark index’s 20th record high this year.
The Nasdaq is on track for five months of gains in a row. It’s the longest winning streak for the Nasdaq since early 2024.
Stocks’ ascent to fresh records come as the Trump administration ramps up its assault on the central bank. While uncertainty lingers about the Trump administration’s feud with Cook, it’s being deliberated by the courts and investors are awaiting more clarity about what might happen.
“The market is waiting and seeing how far this will go,” Rob Haworth, senior investment strategy director at US Bank Asset Management Group, said.
“We believe the subdued market response is a nod towards a potentially extended legal battle,” Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, said in a note. “Nevertheless, the dispute likely signals the potential for larger financial market movements to come.”
Gold, a haven during uncertainty, jumped 1% on Friday. The yellow metal is up 4.8% this month and on pace for its best month since April.
While stocks have floated near record highs, September could be a difficult month, according to Adam Turnquist, chief technical strategist at LPL Financial. Across the past 75 years, the S&P 500 has notched an average decline of 0.7% in September, “making it the worst performing month for stocks,” Turnquist said.
It will be another month jam-packed with economic data. Wall Street will be watching jobs data for August, set to be released on September 5; in addition to Consumer Price Index data for August set to be released on September 11.
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