Stocks edge lower on Wall Street, ending a 3-week winning streak for the S&P 500

NEW YORK —  Stocks on Wall Street gave up early gains and finished lower Friday, ending a three-week winning streak for the Standard & Poor’s 500.

A flurry of selling late in the day left the benchmark index 0.4% lower and in the red for the week. The Nasdaq composite fell 0.7%, while the Dow Jones industrial average ended 0.1% lower.

Despite the downbeat finish, the S&P 500 and the Nasdaq remain near their all-time highs.

A pullback in major technology stocks, which have been big winners in the market’s record-breaking run-up, weighed on the market. Apple fell 1.6%, Microsoft lost 1.3% and Meta Platforms ended 3% lower.

The late-afternoon burst of selling may reflect traders taking profits, with the market near all-time highs, or rebalancing their portfolios as the second quarter comes to a close, said Ross Mayfield, investment strategy analyst at Baird.

“It wouldn’t surprise me at all if there was some profit-taking today, especially out of the names that have really run up,” Mayfield said. “That could be why we’re seeing a little bit of additional weakness from big tech versus the rest of the market.”

The market headed higher in the early going after a closely watched report that showed inflation continues easing. Investors are hoping that cooling inflation will prompt the Federal Reserve to start cutting interest rates, which remain at their highest level in more than 20 years.

Consumer prices rose 2.6% in May compared with a year earlier, according to the latest personal consumption expenditures index, or PCE. That signaled continued easing from a 2.7% reading in April and is sharply lower than the peak reading of 7.1% two years ago.

“It’s moving in the right direction, and this is what the Fed needs to make a decision to cut rates,” said Quincy Krosby, chief global strategist for LPL Financial.

The PCE is the Fed’s preferred measure of inflation, and the latest reading is encouraging for economists and investors who are hoping for rate cuts to help ease pressure on the market and borrowers. Wall Street is betting that the Fed will start cutting interest rates at its meeting in September.

Treasury yields rose in the bond market after initially losing ground after the latest signal of easing inflation. The yield on the 10-year Treasury, which influences interest rates on mortgages and other consumer loans, rose to 4.38% from 4.30% just before the release of the PCE data. The yield on the two-year Treasury, which more closely tracks expectations for Fed actions, rose to 4.74% from 4.72% just before the data’s release.

The Fed raised interest rates to their highest level in more than two decades in an effort to tame inflation back to its 2% target. Other measures of inflation, including the well-known consumer price index, have also confirmed that pressure on prices has been easing.

Consumers are still feeling pressure from inflation, despite the significant easing from its peak, and recent data have shown that spending is weakening and weighing down economic growth. The Fed’s goal was to slow economic growth enough to cool inflation, but not so much that the economy slips into a recession.

“This combination of inflation coming down and consumers being much more careful with spending patterns allows the market to see the possibility of a rate cut in September,” Krosby said.

The strong jobs market has been another big factor driving economic growth, but that has also shown signs of weakening. Wall Street will get updates on job openings, unemployment and hiring next week.

Nike tumbled 20% for the biggest decline among S&P 500 stocks after the shoe and athletic wear company missed Wall Street’s revenue targets and cut its full-year sales guidance. Company executives said they expect sales to decline by single digits in the current fiscal year, citing a “challenging” environment.

Nike’s dour outlook dragged other athletic apparel companies down with it. Foot Locker fell 2.4%, Skechers lost 1% and Under Armour dropped 2.6%.

More retailers, especially those focusing on discretionary items, have been warning about a slowdown in consumer spending. Consumers barely increased spending in May from April, according to the latest government retail sales report.

Gains in financial sector stocks helped limit the pullback in the S&P 500. JPMorgan Chase rose 1.6% and Wells Fargo closed 3.4% higher.

The S&P 500 closed out its final trading day of June with a 3.5% gain for the month. The index is up about 14.5% so far this year.

The Nasdaq gained about 6% for the month and is up 18.1% this year.

All told, the S&P 500 fell 22.39 points to 5,460.48. The Dow dropped 45.20 points to 39,118.86. The Nasdaq slid 126.08 points to 17,732.60.

Troise writes for the Associated Press.