A choppy day of trading on Wall Street ended Friday with an uneven finish for the major stock indexes, as mixed economic data stoked worries that the Federal Reserve's work on bringing inflation to heel isn't done.
The S&P 500 slipped 0.1% after wavering between small gains and losses most of the day. The benchmark index fell 0.3% for the week, its second consecutive losing week.
The Nasdaq composite fell 0.7%, reflecting a pullback in big tech companies. The Dow Jones Industrial Average eked out a 0.3% gain.
Stocks lost ground in the early going after the Labor Department reported Friday that its producer price index, which measures inflation before it hits consumers, rose 0.8% last month from July 2022. The latest figure followed a 0.2% year-over-year increase in June, which had been the smallest annual rise since August 2020.
While modest, the increase in wholesale prices last month could help persuade the Federal Reserve that more rate increases are necessary to lower inflation to 2%, the central bank's goal.
"Not surprisingly, today's report offers the hawkish wing of the Fed more ammunition to advocate for another rate hike before the Fed is convinced it's reached its terminal rate," said Quincy Krosby, chief global strategist for LPL Financial.
High rates work to grind down inflation by slowing the overall economy and hurting prices for investments. The Fed has already pulled its federal funds rate to its highest level in more than two decades, up from virtually zero early last year.
The majority of traders on Wall Street are still betting the central bank will make no change to the fed funds rate at its policy meeting next month, according to data from CME Group.
Even so, the wholesale price data spooked the market, especially coming a day after the government released its latest consumer price index, which showed U.S. consumers paid prices that were 3.2% higher in July than a year earlier. That's a touch milder than the 3.3% inflation rate economists expected to see and down sharply from last summer's peak above 9%. Underlying trends for inflation were also within expectations.
"At this point, I think the market is underestimating [the Fed's] willingness to hike in September," said Ross Mayfield, investment strategy analyst at Baird. "This whole cycle has been an exercise in the market underestimating the Fed's willingness to hike."
Bond yields rose, including the two-year Treasury yield, which climbed to 4.89%. The yield, which closely tracks expectations for the Fed, had been at 4.80% right before the report's release. The yield on the 10-year Treasury rose to 4.16% from 4.10% late Thursday. It helps set rates for mortgages and other important loans.
The bond market's reaction to the inflation report is a signal some investors think the Fed will probably raise interest rates, said Sam Stovall, chief investment strategist at CFRA.
"Investors are still sort of weighing, 'will they or won't they in September?'" he said. "Uncertainty abounds."
By all measures, inflation has cooled over the past year, though it remains above the Fed's 2% target level. The moderating pace of price increases, combined with a resilient job market, has raised hopes that the Fed may achieve a difficult "soft landing": Raising rates enough to slow borrowing and tame inflation without causing a painful recession.
Such hopes helped the S&P 500 rally a big 19.5% through the first seven months of the year, though critics say Wall Street too quickly formed a consensus that inflation is continuing to cool, the economy will avoid a recession and the Fed has already hiked rates for the final time this cycle.
The Fed has said it will make upcoming decisions on rates based on what data reports say, particularly those on inflation and the job market. Its main rate is already at its highest level in more than two decades.
Traders also weighed a preliminary reading in a University of Michigan survey that showed consumer sentiment down slightly from July, when it climbed to its highest level since October 2021. The latest consumer sentiment index was 71.2, down from 71.6 in July and below analysts' consensus forecast of 71.3, according to FactSet.
Among its findings, the latest survey found that consumers' expectations for inflation in the coming year edged lower. That's good news, as the Fed has been adamant about wanting to avoid a vicious cycle where expectations for high inflation drive behavior that only worsens it.
All told, the S&P 500 fell 4.78 points to 4,464.05. The Nasdaq dropped 93.14 points to 13,644.85. The Dow added 105.25 points to 35,281.40.
The major indexes have lost some steam after standout rally through the first seven months of 2023, but remain solidly higher for the year. The S&P 500 is up 16.3%, the Nasdaq is up 30.4% and the Dow is up 6.4%.
Investors also had their eye on the latest batch of quarterly earnings reports Friday.
IonQ jumped 10.7% after the quantum computing technology company raised its full-year guidance after its fiscal second-quarter revenue topped Wall Street's forecasts.
Flowers Foods rose 4.2% after price increases helped drive the bakery goods maker's latest quarterly earnings and revenue, beating analysts' projections.
Traders hammered Cano Health, sending its shares 73% lower, after the chain of primary care medical centers reported quarterly results that fell short of Wall Street's estimates and said it believes its current liquidity isn't enough to cover the next 12 months.
Several major retailers are set to report quarterly results next week, including Home Depot on Tuesday, Target on Wednesday and Walmart on Thursday.
In stock markets abroad, indexes declined in Europe and Asia.
Information for this article was contributed by Joe McDonald of the Associated Press.