US stocks retreated from record highs on Friday as Wall Street digested an update on consumer inflation that showed prices firming higher above the Fed’s target in July.
The Dow Jones Industrial Average (^DJI) fell around 0.2%, and the S&P 500 (^GSPC) lost 0.6%. The tech-heavy Nasdaq Composite (^IXIC) led the retreat, down over 1.1%. Big Tech slumped, with Nvidia (NVDA) declining over 3% to end the week after releasing its highly anticipated earnings report.
After hitting record highs in August, the S&P 500 and Dow ended the month with gains of 1.4% and 2%, respectively, marking the fourth straight month of gains for those indexes. The Nasdaq also capped August with a 1.6% gain in its fifth straight winning month.
A key measure of inflation rose as expected in July, new government data showed Friday. The “core” Personal Consumption Expenditures index, closely studied by the central bank, rose 0.3% on a monthly basis and 2.9% on an annual basis, above the Fed’s 2% inflation target. Both numbers matched economist expectations, though the annual pace marked the biggest rise since February.
Meanwhile, US consumer sentiment declined to a three-month low as consumers in a University of Michigan survey suggested they expect inflation to surge over the next year.
Friday’s data comes after signs of a resilient economy helped lift the S&P 500 and Dow Jones Industrial Average to new all-time highs on Thursday.
Bets that the Fed will ease rates at its September meeting were still riding high Friday, and traders were pricing in an 87% chance of a quarter-point cut following the PCE reading.
The inflation data caps a whirlwind week for markets gripped by Nvidia earnings and President Trump’s effort to oust Fed governor Lisa Cook, which took a new turn. On Friday, a judge is expected to rule on Cook’s bid for a temporary restraining order.
Despite the pullback in stocks on Friday, the major indexes were set for their longest streak of consecutive monthly gains in more than a year.
The tech-heavy Nasdaq Composite was on track to see a 2% bump in August, marking its fifth straight monthly rise, the longest winning streak in nearly a year and a half. For their part, the S&P 500 and the Dow were set for their fourth consecutive month of gains, on track to add 1.6% and 2%, respectively — the longest since September 2024.
And the Russell 2000 (^RUT), which includes small market capitalization companies, eyed a 6% jump for August, on course for its fourth monthly uptick, the longest streak in over four years.