Stocks lose momentum after fresh inflation, consumer spending data

Investing.com -- US stocks gave up some gains on Friday as investors digested economic data showing that the Federal Reserve's preferred inflation gauge had slowed closer to its 2% target and consumer spending growth was broadly steady.

At 1:07 ET (1707 GMT), the benchmark S&P 500 fell 0.03%, the 30-stock Dow Jones Industrial Average gained 205 points or 0.5%, and the tech-heavy Nasdaq Composite was down 0.3%. Headline PCE index slows; US consumer spending rises 0.2% in August

US consumer spending grew at a slower than anticipated rate in August, while inflation pressures continued to ease.

Personal spending, which accounts for more than two-thirds of economic activity, grew by 0.2% in August, slowing from an unrevised 0.5% gain in the prior month, according to data from the Commerce Department's Bureau of Economic Analysis on Friday. Economists had anticipated an uptick of 0.3%. It was the slowest increase in seven months.

Household income growth also unexpectedly slowed to 0.2% from 0.3% in July. The figure was tipped to edge up by 0.4%.

In a post on social media platform X, Kathy Jones, chief fixed income strategist at Charles Schwab (NYSE:SCHW ), said both numbers are "slowing but not falling off a cliff." Wage gains have recently supported consumer spending activity despite some weakening in the US labor market.

Meanwhile, the personal consumption expenditures (PCE) price index, which is used by Federal Reserve officials as a tracker of inflation, rose by 0.1% on a monthly basis, below estimates that it would match July's pace of 0.2%. Year-on-year, the reading cooled to 2.2%, slower than projections of 2.3% and 2.5% in July.

When stripping out volatile items like food and fuel, the so-called core PCE price index also decelerated to 0.1% month-on-month and sped up slightly as anticipated to 2.7% from 2.6% on an annualized basis.

The data comes after the Fed slashed borrowing costs by an outsized 50 basis points last week and signaled that it would roll out more drawdowns later this year. Middle East geopolitical tensions rise 

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Defense stocks including Lockheed Martin Corporation (NYSE:LMT ), Northrop Grumman Corporation (NYSE:NOC ), and Raytheon (NYSE:RTN ) climbed.  Costco falls despite fiscal Q4 beat 

Costco Wholesale Corp (NASDAQ:COST ) fell more than 1% even as the big box retailer reported quarterly results that topped Wall Street estimates, driven by increased market share gains.

Source: Investing.com