US dollar index last down against euro after PCE data
Oil prices lower with weaker demand expected
Fed funds futures price in 89% odds of a cut next month
(Updates to early afternoon)
NEW YORK, Aug 29 (Reuters) –
Major stock indexes fell on Friday, with technology shares including Dell Technologies leading declines, while the dollar weakened against the euro after U.S. inflation data kept alive expectations of a September interest rate cut.
Dell dropped more than 9% after reporting earnings late Thursday that included
costs for AI-optimized servers. Other AI-related shares also fell in the broader tech selloff including Nvidia, down 3.5%, and Broadcom, down 4.2%. The Nasdaq was down more than 1%.
The U.S. Commerce Department said on Friday its Personal Consumption Expenditures Price Index (PCE) rose 0.2% in July, versus an unrevised 0.3% increase in June and matching the estimate of economists polled by Reuters.
In the 12 months through July, PCE inflation increased 2.6% after climbing 2.6% in June. Stripping out the volatile food and energy components, the so-called core PCE Price Index increased 0.3% last month. That followed a 0.3% rise in core inflation in June.
“You have to love it when a plan comes together. Today’s numbers on both the personal consumption, expenditure, and income, and spending, were right down the middle of the fairway,” Art Hogan, chief markets strategist for B. Riley Wealth in Boston, said via email.
“This leaves the door wide open for the Fed to cut rates in September and likely again in October and in December.”
Fed funds futures traders are now pricing in 89% odds of a cut next month, up from 84% before the data.
Traders had increased bets on more cuts after Fed Chair Jerome Powell last Friday adopted an unexpectedly dovish tone.
The euro was up 0.11% at $1.1695. The dollar index , which measures the greenback against a basket of currencies, fell 0.09% to 97.79.
The Dow Jones Industrial Average fell 121.89 points, or 0.26%, to 45,516.07, the S&P 500 fell 45.60 points, or 0.70%, to 6,456.26 and the Nasdaq Composite fell 267.70 points, or 1.23%, to 21,437.45.
Major U.S. financial markets will be closed for the Labor Day holiday on Monday.
European shares closed lower, hitting their lowest in over two weeks, weighed down by British banks, while investors assessed economic data in the U.S. and the euro zone.
MSCI’s gauge of stocks across the globe fell 5.36 points, or 0.56%, to 950.98.
The pan-European STOXX 600 index fell 0.64%.
In Treasuries, benchmark 10-year U.S. Treasury yields were higher on the day, while interest-rate-sensitive two-year yields were on track for their largest monthly drop in a year.
The yield on benchmark U.S. 10-year notes rose 1.6 basis points to 4.223%. The 2-year note yield fell 1.6 basis points to 3.619%.
Germany’s 30-year yield, which touched its highest since 2011 earlier in August, has risen 12 basis points this month, putting it on track for its biggest monthly jump since March, when a historic move towards looser fiscal policy sent bond yields surging. Bond yields move inversely with prices. Fed Governor Christopher Waller on Thursday said he wanted to start cutting interest rates next month and “fully expects” more rate cuts to follow, to bring the Fed’s policy rate closer to a neutral setting.
Oil prices were lower. U.S. crude fell 59 cents to settle at $64.01 a barrel and Brent declined 50 cents to settle at $68.12.
(Reporting by Caroline Valetkevitch in New York. Additional reporting by Chuck Mikolajczak in New York and Marc Jones in London. Editing by Kirsten Donovan, Mark Potter and Cynthia Osterman)
