NEW YORK (AP) — U.S. stocks were falling Friday after the latest inflation reading was roughly in line with expectations, leaving questions about when the low interest rates Wall Street craves will come.
The S&P 500 was little changed in morning trading. The Dow Jones Industrial Average was up 20 points, or 0.1%, as of 10 a.m. Eastern time, while the Nasdaq Composite was down 0.2%.
Gap Inc. posted one of the market’s biggest gains at 20.6% in its latest quarter, as profit and sales beat analysts’ expectations. The parent company of Old Navy and Banana Republic reported growth across all of its brands, reversing earlier declines for most of them. The company also raised its sales and profitability forecasts for this year, even as it said the economic outlook remains uncertain.
That helped offset an 18.2% drop in Dell. The tech company matched analysts’ profit expectations in the latest quarter, but its shares had already risen 122% into 2024 ahead of the report. Analysts also noted concerns about how much profit Dell is squeezing out of every dollar of revenue.
Trump Media & Technology Group Inc. reversed an initial gain to a 5.8% drop in the first trading session after Donald Trump was found guilty of 34 felony counts on Thursday. The company, which runs the Truth social platform, had previously warned in a filing with U.S. securities regulators that a conviction for Trump could hurt the company.
The S&P 500 is on track for its first losing week in six weeks, driven mainly by the recent spike in Treasury yields. But yields edged lower on Friday after a report showed a key measure of inflation stayed at 2.7% last month, as expected. Some fundamental trends improved slightly more than expected.
That’s good news for investors who are waiting for inflation to fall enough to convince the Federal Reserve to cut its key interest rate.
The Federal Reserve has kept the federal funds rate at its highest level in more than two decades in the hopes of slowing the economy and tamping down high inflation, but keeping rates too high for too long could lead to a recession in which workers lose their jobs and corporate profits plummet.
The hope on Wall Street is that the Fed can get the timing right – cutting interest rates by just the right amount at just the right time.
“The conundrum for the Fed is whether growth will slow faster than inflation,” said Brian Jacobsen, chief economist at Annex Wealth Management. “We’ve gone from rapid growth to rapid slowing very quickly. The road to lower inflation has been a fun one so far, but the last mile will be much harder.”
Indeed, a U.S. government report released on Friday showed that consumer spending growth weakened more than economists had expected last month. Income growth also slowed.
Jeffrey Roach, chief economist at LPL Financial, said the numbers suggest businesses “need to prepare for an environment where consumers won’t be as splurge-y as they were last year.”
Following the report, the yield on the 10-year Treasury note fell to 4.49% from Thursday’s close of 4.55%. It had risen above 4.60% earlier this week on concerns about weak demand following the bond auction.
The yield on the two-year Treasury note, which more accurately reflects expectations of Fed action, fell to 4.88% from Thursday’s close of 4.93%.
Few expect the Fed to cut interest rates at its next meeting in less than two weeks, but traders see an 83% chance of at least one rate cut by the end of the year, according to data from CME Group.
Meanwhile, on Wall Street, retail giant Ulta Beauty rose 1.2% after it reported better-than-expected profit and revenue for its latest quarter, but cut its full-year sales and profit forecasts.
Nordstrom vacillated between a loss and a profit after reporting its latest quarterly loss that beat analysts’ expectations. Revenue beat expectations, with particularly strong sales of children’s and women’s clothing, but theft in the company’s shipping network and other costs ate into profits. Its latest gain was 4.3%.
MongoDB shares fell by a quarter despite better-than-expected profit and revenue. The developer database company gave current-quarter and full-year profit guidance that fell short of analysts’ expectations.
Overseas stock markets, Asian and European stock indexes were mixed: Tokyo’s Nikkei rose 1.1%, while Hong Kong’s Hang Seng Index fell 0.8%.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
Stan Cho, The Associated Press
