US stocks edged lower on Friday as investors booked profits following a week of strong gains and new record highs for the S&P 500.
A fresh inflation reading underscored persistent price pressures, tempering optimism after Nvidia’s blockbuster earnings earlier in the week.
Inflation data keeps Fed in focus
The S&P 500 dipped 0.3%, the Nasdaq Composite lost 0.64%, and the Dow Jones Industrial Average shed 56 points, or 0.07%.
The indices snapped a three day gaining streak.
The moves came as the Federal Reserve’s preferred inflation gauge, core personal consumption expenditures (PCE), rose 2.9% in July.
The increase was in line with expectations but marked an acceleration from the prior month and the highest reading since February.
“The Fed opened the door to rate cuts, but the size of that opening is going to depend on whether labor-market weakness continues to look like a bigger risk than rising inflation,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management in a CNBC report.
She added that Friday’s PCE reading keeps investor attention fixed on upcoming jobs data, with markets still anticipating a rate cut in September.
Earlt market movers
Nvidia, which reported 56% revenue growth for the prior quarter earlier this week, extended recent losses, slipping about 3%.
The Wall Street Journal reported that Alibaba had developed a more advanced chip to help fill the gap left by restrictions on Nvidia’s sales to China.
Alibaba shares rose more than 8% in US trading.
Other major movers included Caterpillar, which fell nearly 2% after warning it could face a $1.5 billion to $1.8 billion hit this year from tariffs.
Dell Technologies dropped 9% on a weaker-than-expected outlook for the current quarter, despite beating analyst forecasts for its most recent results.
Meanwhile, Ulta Beauty fell 3% even after raising its full-year revenue and earnings forecast, now expecting revenue of $12 billion to $12.1 billion and earnings of $23.85 to $24.30 per share.
Affirm Holdings rallied 20% after reporting fiscal fourth-quarter earnings of 20 cents per share on revenue of $876 million, topping consensus estimates.
Autodesk jumped 11% following stronger-than-expected second-quarter results and upbeat guidance.
Other gainers included SentinelOne, which climbed 6% on better-than-expected earnings and revenue guidance, and Ambarella, which surged 23% after lifting its revenue outlook on strong artificial intelligence demand.
Dollar Tree added nearly 1% after an upgrade from Telsey Advisory Group, which cited a clearer growth path following the retailer’s sale of Family Dollar.
Seasonal weakness and market outlook
The declines come just one day after the S&P 500 closed above the 6,500 level for the first time.
For August, the Dow Jones Industrial Average is on track to gain 3.4%, the S&P 500 2.6%, and the Nasdaq 2.8%.
Despite the upbeat month, seasonal trends have investors cautious heading into September, historically the weakest month of the year for equities.
Since 1950, the S&P 500 has averaged a 0.7% decline in September, according to The Stock Trader’s Almanac.
Still, some strategists remain optimistic. Chris Zaccarelli, chief investment officer at Northlight Asset Management, said any volatility in September or October would likely prove a buying opportunity, especially if the Fed begins cutting rates outside of a recession.
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