NEW YORK, NY (AP) - Wall Street has been swaying on Friday after some encouraging inflation signals. It is limping to the end of a miserable month.
In afternoon trading, the S&P 500 fell 0.2% with most of its stocks declining. As of 1:33 pm Eastern time, the Dow Jones Industrial Average fell 145 points or 0.4% to 33,523. The Nasdaq Composite rose 0.2%.
Nike's stock rose 7.1% after it reported a better profit than analysts had expected for the last quarter. Its strength overseas compensated for some declines it experienced in North America.
The yields on the Treasury market have fallen further from their highest levels for more than a decade. The yields dropped after a report revealed that the Federal Reserve's preferred measure of inflation was slightly cooler than expected last month.
The yield on the 10-year Treasury fell to 4.55% late Thursday from 4.58%. This week, it surged to its highest level in seven years. It was 3.50% last May and only 0.50% by 2020.
Investors are less willing to pay higher prices for stocks or other riskier investments when Treasurys are yielding more. This is a major reason why the S&P 500 dropped by more than 4% last month, bringing the gains for the year down to 13%.
Treasury yields are rising sharply, as Wall Street adjusts to a new norm where the Federal Reserve will likely keep interest rates higher for longer. The Fed wants to bring down the still high inflation rate to its target. Its main tool, high interest rates, does this by slowing the economy and hurting investment prices.
The Fed's principal interest rate has reached its highest level since 2001. Last week, the central bank said it might cut interest rates by less next year than originally expected.
The economic data released on Friday showed that not only was inflation a little lower than expected in August but also the growth of spending by U.S. consumer. This can actually be good for inflation, as it means that less money is being spent on purchases. This could in turn encourage companies to lower prices. It could also hurt the main factor that has kept the U.S. out of recession.
Brian Jacobsen is the chief economist of Annex Wealth Management. He said that spending growth among U.S. consumer has slowed down. The decline in real disposable incomes, higher energy prices and student loan repayments since June are not encouraging.
The oil prices have reached their highest levels in over a year. This is putting pressure on the economy as fuel costs are increasing for everyone. The price of a barrel of U.S. oil fell by 0.7% on Friday, but is still higher than the $70 it was in June. Brent crude, which is the international standard, fell 0.7% to $92.47 a barrel.
In the meantime, the resumption in student loan repayments could divert more dollars from consumer spending that has kept the economy afloat.
The economy is also at risk this weekend, as the U.S. Government prepares for another possible shutdown. The markets have generally held up well during previous shutdowns. However, a few important economic reports are scheduled in the coming weeks.
Next week is the deadline for the latest monthly report on the U.S. job market. The following week will bring two important reports about inflation. The Fed's decision to base future interest rate decisions on the data it receives could be complicated if such reports are delayed. The Fed's rate-setting meeting ends on November 1.
Shares of Blue Apron surged 133% on Wall Street after the meal-kit company announced that it would be bought by Wonder Group at $13 per share, in cash. The deal was valued at $103 millions.
Big Tech stocks helped offset market losses, as they are seen as the largest beneficiaries of lower bond yields. Microsoft's 0.7% rise and Nvidia's 1% increase were the two strongest forces that helped offset a decline in the S&P 500.
The S&P 500 energy stocks fell 2% collectively. This was the worst performance of the 11 sectors in the S&P 500 index, as oil prices fell. However, they are still the best performers on the market since the summer. Exxon Mobil dropped 2.1% and Schlumberger fell 3.5%.
Ford and General Motors shares were down after the United Auto Workers announced that they would expand their limited strike for each company to include a second facility. Ford shares fell by 1.2% and GM's were down 0.7%.
After the Asian stock exchanges closed, European indexes rose after they were closed.
Matt Ott and Elaine Kurtenbach, AP Business Writers, contributed.