NEW YORK: US stock indexes fell on Friday, with the Nasdaq and the S&P 500 slipping from record highs as investors booked profits and weighed hawkish Federal Reserve projections against slowing economic data.
Limiting losses on the tech-heavy Nasdaq, Adobe jumped 14.5% and was on track to mark its biggest one-day jump in four years after the company raised its annual revenue forecast on more demand for its AI-powered software.
The Nasdaq and S&P 500 were set for their first session in the red this week, after both notching four consecutive record closing highs.
“What we’re seeing is some mild profit taking, we’ve had a good run up and set record highs almost every day this week,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
The week’s strong performance came as markets persisted with expectations of a September start to policy easing - seeing an over 70% chance of a cut at that meeting, as per the CME’s FedWatch tool - while traders are pricing in two cuts by year-end.
However, that clashed with the central bank’s own forecasts released on Wednesday, where policymakers dialed back their projections for three cuts this year to just one.
Cleveland Fed President Loretta Mester said the trend of inflation moving lower is good news for the economy and the central bank.
Hopes of easing Fed policy, combined with megacaps’ strength, have seen major indexes rally with the S&P 500 and the Nasdaq on pace for their seventh week of gains out of eight.
“The market is also just pricing in a probability, even if it’s a small one, of a second half recession where the Fed has to cut rates a lot,” said Ross Mayfield, investment strategy analyst at Baird.
The blue-chip Dow was on track to end the week lower.
A preliminary reading of the University of Michigan’s Consumer Sentiment Index slipped to 65.6 in June, sharply lower than expectations.
Nine of the 11 S&P 500 sectors fell, led by a 1.6% slide in industrials, and the economically sensitive small-cap Russell 2000 index lost 1.8 %.
At 12:03 p.m. ET, the Dow Jones Industrial Average was down 126.96 points, or 0.33%, at 38,520.14, the S&P 500 was down 16.29 points, or 0.30%, at 5,417.45, and the Nasdaq Composite was down 30.57 points, or 0.17%, at 17,636.99.
Among others, Broadcom extended Thursday’s gains with a 1.7% rise after an upbeat forecast and announcing a 10-for-one stock split.
Sirius XM slipped 0.8% after the Nasdaq said the stock would be removed from the Nasdaq 100 index, and replaced with Arm Holdings. Shares of Arm rose 2.2%.
Comments from Chicago Fed President Austan Goolsbee and Fed Governor Lisa Cook are also expected on Friday.
A BofA Global Research report showed US value stock funds saw $2.6 billion of outflows, while investors poured $1.8 billion into US growth stock funds in the week to Wednesday.
Declining issues outnumbered advancers for a 3.34-to-1 ratio on the NYSE and for a 2.77-to-1 ratio on the Nasdaq.
The S&P index recorded eight new 52-week highs and 16 new lows, while the Nasdaq recorded 19 new highs and 149 new lows.
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