Stocks retreat from record highs to end August

Wall Street closed out another winning month Friday, even as stocks gave back some of their recent gains, pulling the market below its latest all-time highs.

The S&P 500 fell 0.6% a day after climbing to a record high. The benchmark index ended August with a 1.9% gain, its fourth straight month of gains. It’s now up 9.8% so far this year.

The Dow Jones Industrial Average also came off its own record high, slipping 0.2%, while the Nasdaq composite closed 1.2% lower.

“The reason the market is down today is primarily because we are heading into a long weekend, and a lot of traders don’t like to have a hefty exposure over a long weekend because of the news that could come out and take them by surprise,” said Sam Stovall, chief investment strategist at CFRA.

Mixed economic data may also have given traders an excuse to sell and pocket some profits following the market’s milestone-setting week. A closely watched measure of inflation showed prices mostly held steady last month, and a survey of consumer sentiment suggested Americans’ worries about the economy and prices intensified since July.

Losses in technology weighed on the market, offsetting gains in health care and other sectors.

Dell Technologies slid 8.9% for the biggest decline among S&P 500 stocks a day after the company reported second-quarter revenue that exceeded analysts’ expectations, but noted that margin pressures and weakness in PC revenue.

Among other tech companies that ended the day in the red, tech giant Nvidia fell 3.3%, Broadcom dropped 3.6% and Oracle slid 5.9%.

The Commerce Department reported prices rose 2.6% in July compared with a year ago, as measured by the personal consumption expenditures index. That’s the same annual increase as in June and in line with what economists expected.

Still, excluding the volatile food and energy categories, prices rose 2.9% last month compared to the same period a year earlier, up from 2.8% in June and the highest since February.

While inflation is much lower than the roughly 7% peak it reached three years ago, it is still running noticeably above the Fed’s 2% target.

Still, Federal Reserve Chair Jerome Powell signaled last week that the central bank may cut its key interest rate at its meeting next month, amid signs of sluggishness in the job market.

The most recent government data suggests hiring has slowed sharply since this spring.

“Today’s in-line PCE Price Index will keep the focus on the jobs market,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. “For now, the odds still favor a September cut.”

Lower rates can boost investment prices and the economy by making it cheaper for U.S. households and businesses to borrow, but they risk worsening inflation.

Traders see a roughly 87% chance that the central bank will cut its benchmark interest rate next month by a quarter of a percentage point, according to data from CME Group.

Meanwhile, the latest reading in a survey of U.S. consumers by the University of Michigan showed sentiment soured this month. The final August reading is the lowest since May, reflecting heightened concerns about prices and the economy.

Treasury yields were mixed in the bond market. The yield on the 10-year Treasury rose to 4.23% from 4.21% late Wednesday. The yield on the two-year Treasury, which more closely tracks expectations for Federal Reserve action, slipped to 3.62% from 3.63%.

The Fed will review two additional important inflation barometers before its next policy meeting: the producer price index and the consumer price index. Unless those reports show a huge spike in inflation, the Fed is “almost guaranteed” to cut interest rates next month, said Chris Zaccarelli, chief investment officer for Northlight Asset Management.

Among the stocks that weighed on the market Friday were Ulta Beauty and Marvell Technology.

Ulta fell 7.1% despite posting second-quarter earnings and revenue that topped analysts’ estimates, while Marvell slid 18.6% after its third-quarter guidance fell short of what Wall Street was expecting.

Not all stocks lost ground. Petco Health & Wellness and Autodesk bucked the broader market slide after reporting better-than-expected quarterly results. Petco jumped 23.5% and Autodesk climbed 9.1%.

All told, the S&P 500 fell 41.60 points to 6,460.26. The Dow dropped 92.02 points to 45,544.88, and the Nasdaq gave up 249.61 points to close at 21,455.55.

European markets were mostly lower, and Asian markets closed mixed.

U.S. markets will be closed on Monday for the Labor Day holiday.