Wall Street wrapped up another successful month, even as stocks pulled back slightly from their highs. The S&P 500 dipped by 0.6%, just after hitting a record high. Still, it finished August with a 1.9% gain, marking the fourth consecutive month of growth, and is up 9.8% this year.
The Dow Jones Industrial Average also fell, down 0.2%, while the Nasdaq composite dropped 1.2%. Sam Stovall, chief investment strategist at CFRA, noted that traders often reduce their exposure before a long weekend to avoid surprises.
Mixed economic data likely sparked some selling, allowing traders to lock in profits after a strong week. A recent inflation measure indicated that prices largely held steady. However, a consumer sentiment survey revealed that Americans are becoming increasingly worried about the economy and rising prices.
Technology stocks saw significant losses, overshadowing gains in healthcare and other areas. Dell Technologies led the decline, falling 8.9% after reporting strong second-quarter revenue but expressing concerns over margin pressure and weak PC sales.
Other tech companies like Nvidia, Broadcom, and Oracle also faced declines, with drops of 3.3%, 3.6%, and 5.9%, respectively. In July, the Commerce Department reported a 2.6% increase in prices year-over-year, consistent with June’s figures. However, when excluding food and energy, inflation rose to 2.9%, the highest figure since February.
This inflation rate remains above the Federal Reserve’s 2% target, although it’s significantly lower than the peak of around 7% three years ago. Federal Reserve Chair Jerome Powell hinted that a rate cut may be on the table for next month amid signs of slowing job growth. Recent data shows hiring has dropped sharply, raising concerns about economic momentum.
Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, pointed out that the inflation data keeps the focus on the job market, suggesting that a September rate cut is likely if the trend continues.
Lower interest rates could stimulate borrowing, boosting business investments and consumer spending. Currently, traders see an 87% chance that the Fed will cut its benchmark interest rate by a quarter percentage point in September, based on CME Group data.
In consumer sentiment, the University of Michigan reported the lowest August reading since May, reflecting growing concerns about prices and economic stability. In the bond market, Treasury yields displayed mixed movements, with the 10-year yield rising slightly to 4.23% and the two-year yield dropping to 3.62%.
Before the next Fed meeting, two critical inflation reports—the producer price index and consumer price index—will be released. Chris Zaccarelli, chief investment officer at Northlight Asset Management, stated that unless these reports show a significant inflation spike, a rate cut is “almost guaranteed.”
Despite the downward trends, not all companies suffered. Petco Health & Wellness surged by 23.5%, and Autodesk climbed 9.1% after reporting better-than-expected earnings. In contrast, Ulta Beauty dipped by 7.1% despite exceeding revenue expectations, while Marvell Technology plummeted by 18.6% due to weaker future guidance.
Overall, the S&P 500 fell 41.60 points, ending at 6,460.26. The Dow dropped 92.02 points to 45,544.88, and the Nasdaq closed down 249.61 points at 21,455.55. European markets mostly declined, while Asian markets had mixed results. U.S. markets are set to be closed on Monday for Labor Day.
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