Stock market today: Wall Street drifts after inflation report confirms price increases are cooling

U.S. stock indexes were mixed Friday after shedding some of their early gains following a U.S. government report showing inflation remained low last month.

The S&P 500 was up 0.1% in afternoon trading, with slightly more than half of the stocks in the index trading lower. The Dow Jones Industrial Average was down 100 points, or 0.3%, a day after setting its third all-time high this week. The Nasdaq composite rose 0.3% as of 1:37 p.m. Eastern.

Wall Street was mulling over encouraging reports on inflation, consumer spending and income.

The Commerce Department said its personal consumption and expenditures report showed prices rose just 0.2% from June to July, up slightly from the previous month’s 0.1% increase. Compared with a year earlier, inflation was unchanged at 2.5%.

Economists had expected the PCE, which is the Federal Reserve’s preferred measure of inflation, would to show that inflation edged up to 2.6% in July. It was as high as 7.1% in the middle of 2022.

The report confirms price increases are cooling, keeping the central bank on track to cut rates for the first time in more than four years at its upcoming meeting next month. The market is betting that the Fed will cut its benchmark rate by a full 1% by the end of the year.

“Weakening inflation gives the Fed plenty of room to begin cutting rates, while still resilient household spending is the recipe for a soft landing,” said David Alcaly, lead macroeconomic strategist at Lazard Asset Management.

Bond yields were mixed in the Treasury market. The yield on the 10-year Treasury rose to 3.91% from 3.86% late Thursday.

Technology stocks led the market. Marvell Technology climbed 8.9% after its latest quarterly results hit Wall Street’s sales and profit targets. Other chipmakers also rose. Broadcom added 2% and Nvidia gained 0.6%.

Dell also beat analysts’ second-quarter forecasts, boosted by record server and networking revenue as companies continue to beef up their artificial intelligence infrastructure. Its shares rose 3.8%.

Mall-based cosmetics retailer Ulta Beauty fell 4.5% after its sales and profit fell short of expectations. Ulta also trimmed its guidance below analysts’ forecasts. Warren Buffet’s Berkshire Hathaway revealed it holds a stake in the company earlier this month,

Mostly solid U.S. earnings and economic growth updates are capping off a month of encouraging reports for the broader economy. Data from various reports in August have shown that retail sales, employment and consumer confidence remain strong.

Friday’s Commerce Department report also showed that Americans stepped up their spending by a vigorous 0.5% from June to July, up from 0.3% the previous month, and incomes rose 0.3%, faster in July than in the previous month.

The trends have encouraged Wall Street. The benchmark S&P 500 is on pace to close out the final trading day of August with a 1.4% gain for the month. The index is up 17.4% this year and is within 1.2% of the all-time high it set in July.

Still, stocks have historically done poorly in September.

Since 1950, the S&P 500 has finished higher in September only 43% of the time, making it the worst month for stocks, said Adam Turnquist, chief technical strategist for LPL Financial.

“During the month, the index tends to trade sideways during the first half, with losses beginning to accumulate into month end,” Turnquist said.

Markets in Europe rose initially following a report showing inflation fell sharply in the European Union this month. The report sets up the European Central Bank to cut interest rates next month. Major stock indexes in the region turned red by late afternoon. France's CAC 40 slipped 0.1%, Germany's DAX and Britain's FTSE 100 were essentially flat.

Markets in Asia rose. Japan’s benchmark Nikkei 225 added 0.7% to finish at 38,647.75 after data on the world’s fourth largest economy came in mostly positive.

U.S. stock exchanges will be closed Monday for the Labor Day holiday.