U.S Stocks Slip as the Fed's Preferred Inflation Gauge Remains Unchanged

US equities slipped from record levels on Friday in a light trading session as investors booked profits before the long Labor Day weekend. The move came after the Federal Reserve’s favored inflation gauge showed price pressures remain persistently high.

‍

The S&P 500 declined 0.3% as of 9:36 a.m. in New York, dipping below the 6,500 mark, though it remained on pace to post four consecutive months of gains and end the week mostly unchanged. The Nasdaq 100 dropped 0.5%, while overall trading activity was about 25% lower than the 30-day average.

‍

Historical data from the Stock Trader’s Almanac shows the S&P 500 typically loses an average of 0.1% on the Friday preceding Labor Day over the past two decades.

‍

On the corporate front, Dell Technologies tumbled 10% after reporting weaker sales of AI servers compared to the prior quarter and profit margins that missed Wall Street expectations. Marvell Technology sank 16% after its second-quarter data center revenue fell short of analysts’ estimates.

‍

US consumer spending surged in July, marking the strongest increase in four months and signaling robust demand despite lingering inflationary pressures. The core personal consumption expenditures (PCE) price index, a key measure tracked by the Fed, rose 2.9% year-over-year in July, holding well above the central bank’s 2% target.

‍

The data sparked fresh debate over whether the Fed has room to cut rates next month, even after Fed Governor Christopher Waller reiterated his support for easing borrowing costs.
‍

Inflation ticked up slightly, right in line with forecasts, and this morning’s PCE data should only reinforce expectations for a Fed rate cut next month,” said Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management.

‍

With US markets closed on Monday for Labor Day, investors are turning their attention to September historically the most challenging month for equities. Seasonal headwinds such as institutional portfolio rebalancing, reduced retail activity, rising volatility, and limited corporate buybacks typically weigh on performance.

‍

According to Bank of America’s Paul Ciana, the S&P 500 has declined in 56% of Septembers, averaging a 1.17% drop since 1927. During the first year of a presidential term, the likelihood increases, with the index falling in 58% of Septembers by an average of 1.62%.

‍

Looking ahead, next Friday’s jobs report will be closely watched for signs of cooling in the labor market. Economists project US employers added 78,000 jobs in August, following three months of slower hiring and a rising unemployment rate.

‍

In company news, Caterpillar slipped 2.6% after warning of a larger-than-expected tariff burden that could cost the industrial giant up to $1.8 billion this year. Meanwhile, Alibaba Group jumped 8.4% on strong revenue growth fueled by China’s AI boom.

‍

Petco surged 19% after issuing upbeat third-quarter guidance and raising its 2026 outlook. In contrast, Ulta Beauty fell 3.4%, despite lifting its full-year comparable sales forecast. Gap dipped 0.9% as the retailer warned of margin pressure from tariffs, threatening its recent turnaround progress.

‍

Chipmaker Ambarella soared 29% its biggest one-day gain ever after topping revenue and earnings estimates and boosting its fiscal 2026 growth forecast, citing strong AI-driven demand. Meanwhile, cybersecurity firm SentinelOne advanced 6.6% after raising its full-year revenue outlook.

‍

Investors will monitor macroeconomic data and corporate updates as September begins, with the jobs report and Fed policy outlook likely steering market sentiment. For more insights, stay tuned to our daily wrap, “Before the Bell,” and weekly and monthly S&P reviews for comprehensive market coverage.

‍