Global stock markets faced downward pressure on Friday, erasing early gains, while U.S. Treasury yields climbed and the dollar weakened following news of unchanged U.S. monthly inflation in May.
The flat reading in the U.S. Personal Consumption Expenditures (PCE) price index for May, as reported by data, marked no change from the 0.3% increase observed in April. Over the twelve months through May, the PCE price index rose by 2.6%, aligning closely with economists’ forecasts.
This data has fueled optimism among some investors regarding potential interest rate cuts by the Federal Reserve starting in September.
Earlier in the trading session, the MSCI world stock index, S&P 500, and Nasdaq all reached record highs, but later retraced. On Wall Street, trading activity surged as the FTSE Russell finalized the reconstitution of its indexes, contributing to the second-highest daily volume of the year.
“In the morning, the market seemed most focused on the PCE report,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina. “But, you had the Russell reconstitution, end-of-the-quarter repositioning, and selling, which influenced significant market movements, especially later in the day.”
At the close of trading, the Dow Jones Industrial Average fell 45.20 points to 39,118.86, the S&P 500 lost 22.39 points to 5,460.48, and the Nasdaq Composite dropped 126.08 points to 17,732.60.
For the quarter, the S&P 500 gained 3.9%, the Nasdaq rose 8.3%, while the Dow fell 1.7%.
The MSCI’s global stock index dipped 0.22% to 802.01, and Europe’s STOXX 600 index also fell by 0.23%.
Investors also considered remarks made during the U.S. presidential debate between Democratic President Joe Biden and Republican challenger Donald Trump, ahead of the upcoming November election. The debate outcomes left international allies preparing for the potential return of Trump to office.
Shares of Trump Media & Technology Group rose early but ended the day down by 10.8%.
U.S. Treasury yields initially declined after the U.S. inflation report but reversed course amid political uncertainty following the debate and ahead of French legislative elections. The yield on benchmark U.S. 10-year notes increased by 10.4 basis points to 4.392%.
The U.S. dollar showed slight weakness following the inflation data, initially dropping against the yen but later stabilizing. It traded slightly higher against the Japanese yen at 160.815 yen, after earlier reaching a 38-year high of 161.27 yen. The dollar index, which measures the greenback against a basket of currencies, fell by 0.05% to 105.84.
Oil prices declined, with U.S. West Texas Intermediate (WTI) crude futures settling at $81.54 per barrel, down by 20 cents.
In summary, the day’s market movements reflected a complex blend of economic data, political developments, and investor sentiment as the second quarter drew to a close.
