U.S. stocks retreated from record highs on Friday as investors analyzed a new inflation report showing consumer prices remained stubbornly above the Federal Reserve’s target in July.
The Dow Jones Industrial Average dipped approximately 0.2%, while the S&P 500 declined 0.6%. The tech-heavy Nasdaq Composite experienced the steepest losses, falling over 1.1% as major technology stocks slumped. Nvidia (NVDA) was a notable decliner, dropping more than 3% to close out a week marked by its highly anticipated earnings report.
The pullback was prompted by new data on the “core” Personal Consumption Expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge. The index rose 0.3% monthly and 2.9% annually, in line with economist expectations. While the monthly figure was as anticipated, the annual increase marked the fastest pace since February and kept inflation well above the Fed’s 2% goal.
Adding to economic concerns, a University of Michigan survey revealed that consumer sentiment fell to a three-month low, with respondents expecting inflation to climb over the next year.
Despite Friday’s inflation data, trader expectations for a Federal Reserve rate cut at its September meeting remained strong, with markets pricing in an 87% probability of a quarter-point reduction. The economic reports capped a significant week that included Nvidia’s earnings and political developments surrounding President Trump’s attempt to oust Fed governor Lisa Cook.
Even with the day’s decline, the major indexes secured their longest streak of monthly gains in over a year. The S&P 500 and the Dow ended August with gains of 1.6% and 2%, respectively, capping a fourth consecutive month of advances. The Nasdaq extended its winning streak to five months with a 2% rise in August, its longest in nearly a year and a half. The Russell 2000 small-cap index surged 6% for the month, its fourth straight monthly gain and its longest winning streak in over four years.
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