Stock Market Update: S&P 500 Ends 3-Week Winning Streak as Stocks Dip on Wall Street

Stocks on Wall Street relinquished early gains and closed lower on Friday, marking an end to a three-week winning streak for the S&P 500.

The benchmark index finished 0.4% lower by the end of the day, leading to a weekly decline. The Nasdaq composite dropped 0.7%, while the Dow Jones Industrial Average ended 0.1% down.

Despite these declines, both the S&P 500 and the Nasdaq remain near their record highs.

The market saw a pullback in major technology stocks, which have been key drivers in the market’s recent record-breaking performance. Apple slid 1.6%, Microsoft declined 1.3%, and Meta Platforms closed 3% lower.

Late-day selling could reflect profit-taking, particularly in stocks that have seen substantial gains, or portfolio rebalancing as the second quarter concludes, according to Ross Mayfield, investment strategy analyst at Baird.

“It wouldn’t surprise me at all if there was some profit-taking today, especially out of the names that have really run up,” Mayfield said. “That could be why we’re seeing a little bit of additional weakness from big tech versus the rest of the market.”

Earlier in the day, the market initially moved higher following a closely watched report showing continued easing of inflation. Investors are hopeful that moderating inflation will prompt the Federal Reserve to consider interest rate cuts, which are currently at their highest level in over 20 years.

According to the latest personal consumption expenditures index (PCE), consumer prices rose 2.6% in May compared to a year ago, down from 2.7% in April and significantly lower than the peak of 7.1% two years ago.

“This movement is positive and is what the Fed needs to decide on rate cuts,” said Quincy Krosby, chief global strategist for LPL Financial.

The PCE is the Fed’s preferred gauge of inflation, and the latest figures are encouraging for economists and investors anticipating rate cuts to alleviate market pressures and borrowing costs. The market anticipates that the Fed could initiate rate cuts as early as its September meeting.

In the bond market, Treasury yields initially dipped following the inflation data but later rose. The yield on the 10-year Treasury, which impacts mortgage and other consumer loan rates, rose to 4.38% from 4.30% before the PCE release. The yield on the two-year Treasury, which closely tracks Fed rate expectations, increased to 4.74% from 4.72% before the data.

The Fed has raised interest rates to their highest levels in more than two decades in an effort to control inflation and bring it back to its 2% target. Other inflation indicators, including the widely followed consumer price index, also indicate easing price pressures.

Despite inflation easing from its peak, consumers still feel its impact, and recent data suggests weakening spending that is weighing on economic growth. The Fed aims to temper economic growth sufficiently to curb inflation without pushing the economy into recession.