NEW YORK (AP) — U.S. stocks are drifting Friday after the latest reading on inflation came in roughly as expected, leaving open the question of when Wall Street will get the lower interest rates that it craves.
The S&P 500 was virtually unchanged in morning trading. The Dow Jones Industrial Average was up 20 points, or 0.1%, as of 10 a.m. Eastern time, and the Nasdaq composite was 0.2% lower.
Gap jumped to one of the market’s biggest gains, 20.6%, after delivering stronger profit and revenue for the latest quarter than analysts expected. The parent company of Old Navy and Banana Republic reported growth across its brands, reversing earlier declines at most of them. The retailer also raised its forecasts for sales and profitability this year despite saying the outlook for the economy remains uncertain.
It helped to offset an 18.2% tumble for Dell. The tech company matched analysts’ expectations for profit in the latest quarter, but its stock had already soared 122% in 2024 ahead of the report. Analysts also pointed to concerns about how much profit Dell is squeezing out of each $1 in revenue.
Trump Media & Technology Group went from an initial gain to a slump of 5.8% in its first trading following the conviction of Donald Trump on 34 felony charges Thursday. The company, which runs the Truth Social platform, had earlier warned in filing with U.S. securities regulators that a conviction of Trump could hurt it.
The S&P 500 is on track for its first losing week in the last six, largely because of an earlier jump in Treasury yields. But yields eased Friday following the release of the report showing a key measure of inflation remained at 2.7% last month, exactly as forecast. Some underlying trends improved by a touch more than expected.
That’s welcome news for investors, who are waiting for inflation to come down enough to convince the Federal Reserve to cut its main interest rate.
The Fed has been keeping the federal funds rate at the highest level in more than 20 years in hopes of slowing the economy enough to stifle high inflation. But if it holds rates too high for too long, it could result in a recession that throws workers out of their jobs and craters profits for companies.
The hope on Wall Street is that the Fed can pull off a precise landing where it eases up on interest rates at the exact right time, by the right amount.
“The pickle for the Fed is whether growth will slow faster than inflation,” said Brian Jacobsen, chief economist at Annex Wealth Management. “We’ve gone from great growth to slower growth pretty quickly. The road to lower inflation has been like a joyride so far, but the last mile will be more challenging.”
Indeed, Friday’s report from the U.S. government also showed that growth in spending by consumers weakened last month by more than economists expected. Income growth also slowed.
The numbers show businesses “need to prepare for an environment where consumers are not splurging like they were last year,” according to Jeffrey Roach, chief economist for LPL Financial.
After the report, the yield on the 10-year Treasury fell to 4.49% from 4.55% late Thursday. It had gotten back above 4.60% earlier this week amid worries about tepid demand following some auctions for Treasurys.
The two-year Treasury yield, which more closely tracks expectations for Fed action, slipped to 4.88% from 4.93% late Thursday.
Virtually no one expects the Federal Reserve to cut interest rates at its next meeting in less than two weeks. But traders are betting on an 83% probability that it will cut at least once by the end of the year, according to data from CME Group.
Elsewhere on Wall Street, retailer Ulta Beauty climbed 1.2% after edging past forecasts for profit and revenue in the latest quarter, though it cut its forecast for full-year sales and earnings.
Nordstrom swung between losses and gains after reporting a worse loss for the latest quarter than analysts expected. Revenue topped expectations, with sales growth particularly strong for kids’ and women’s apparel, but theft in the company’s transportation network and other expenses ate into its profit. It was recently 4.3% higher.
MongoDB lost a quarter of its value despite topping forecasts for profit and revenue. The company, which offers a database for developers, gave forecasts for profit in the current quarter and for this full year that fell short of analysts’ expectations.
In stock markets abroad, indexes were mixed across Asian and Europe. Tokyo’s Nikkei 225 rose 1.1%, while Hong Kong’s Hang Seng fell 0.8%.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.