S&P 500, Nasdaq drop as investors weigh Fed moves after inflation data

S&P 500, Nasdaq drop as investors weigh Fed moves after inflation data

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* US annual PCE inflation rises 2.7% YoY in April

* Dell plunges after lower current-quarter profit forecasts

* Trump Media falls in choppy trading after Trump’s
conviction

* Indexes: Dow up 0.15%, S&P down 0.51%, Nasdaq loses 1.23%

May 31 (Reuters) –

The S&P 500 and the Nasdaq gave up early gains on Friday and
were set to snap their five-week winning streaks, as investors
evaluated the timing of rate cuts from the Federal Reserve
following an inflation report largely in line with estimates.

After opening marginally higher, the indexes dropped to
a two-week low, weighed by megacap growth names such as Alphabet
, Amazon.com and Nvidia, which lost
between

1.1

% and

2.6

%.

Technology led declines among the S&P 500
sectors, falling 1.5% and on track for its worst week in over a
month, while the Philadelphia SE Semiconductor Index lost
2.6%.

U.S. inflation tracked sideways in April, a worrying sign
for the central bank that suggests the elevated pace of price
increases could last longer than expected, according to the
Fed’s preferred Personal Consumption Expenditure report.

“Progress on disinflation has clearly stalled this
year,” said Cameron Dawson, chief investment officer at Newedge
Wealth.

“The inflation data is not hot enough to suggest that
(the Fed) needs to hike rates again, but it’s not cool enough to
suggest that they can cut rates right away.”

Still, expectations for a

September rate cut

climbed to over 55%, compared with 48.7% seen before the
data, according to the CME FedWatch tool.

Tech and chip stocks, which have led Wall Street’s
recent rally, retreated this week as a spike in Treasury yields
pressured riskier assets.

The blue-chip Dow fared better than its peers, helped by
healthcare stocks. The S&P 500 healthcare sector was
among the gainers, up

0.7

%, along with real estate’s 1.2% rise.

“Investors are starting to look for parts of the market
where there’s better value and they are rotating into those that
have been laggards,” said Garrett Melson, portfolio strategist
at Natixis Investment Managers.

Further weighing on sentiment, the Chicago Purchasing
Managers’ Index fell to 35.4, significantly below the estimated
reading of 41.

Comments from Atlanta President Raphael Bostic, a
Federal Open Market Committee voting member, are expected later
in the day.

At

11:29

a.m. ET, the Dow Jones Industrial Average

was up 57.67 points, or 0.15%, at

38,169.15

, the S&P 500

was down 26.62 points, or 0.51%, at

5,208.86

, and the Nasdaq Composite

was down 206.02 points, or 1.23%, at

16,531.06

.

Among big movers, Dell plummeted 22% after it
forecast current-quarter profit below market estimates and
signaled that higher costs to build servers that meet heavy AI
workloads would dent its annual margins.

Zscaler jumped 6.5% after the security solutions
provider forecast fourth-quarter results above estimates.

Gap surged 24.2% after the apparel maker raised its
annual sales forecast and its first-quarter results beat market
expectations, in fresh signs that its turnaround strategy was
starting to work.

Trump Media & Technology Group fell 5.4% after a New
York jury convicted former President Donald Trump of falsifying
documents to cover up a hush money payment to a porn star ahead
of the 2016 elections.

Advancing issues outnumbered decliners by a 1.84-to-1 ratio
on the NYSE and by a 1.17-to-1 ratio on the Nasdaq.

The S&P index recorded eight new 52-week highs and six
new lows, while the Nasdaq recorded

40

new highs and

59

new lows.

(Reporting by Johann M Cherian and Lisa Pauline Mattackal in
Bengaluru; Additional reporting by Pranav Kashyap; Editing by
Pooja Desai)

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