By Caroline Valetkevitch
LONDON (Reuters) -Major stock indexes eased while U.S. Treasury yields rose on Friday, with U.S. inflation data largely in line with economists’ views and keeping expectations of a September interest rate cut intact.
U.S. stock index futures trimmed losses after the data, while the U.S. dollar index pared gains a little. But the S&P 500 was last down 0.7%, with technology shares leading the way lower. Shares of Dell Technologies were down more than 9% following its results and guidance.
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 the 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 Dow Jones Industrial Average fell 205.66 points, or 0.45%, to 45,431.24, the S&P 500 fell 44.52 points, or 0.68%, to 6,457.34 and the Nasdaq Composite fell 232.19 points, or 1.07%, to 21,472.97.
MSCI’s gauge of stocks across the globe fell 5.43 points, or 0.57%, to 950.91.
The pan-European STOXX 600 index fell 0.53%.
Earlier, shares in China notched up their best month in almost a year with a more than 10% gain on hopes that its economy, especially the tech sector, is picking up.
The euro was last down 0.19% at $1.166. Against the Japanese yen, the dollar strengthened 0.2% to 147.22. The dollar index, which measures the greenback against a basket of currencies, was up slightly at 98.06.
While U.S. Treasury yields rose on the day, interest rate sensitive two-year yields were on track for their largest monthly drop in a year, with major U.S. financial markets closed for the Labor Day holiday on Monday.
The 2-year note <US2YT=RR> yield was last up 0.2 basis points on the day at 3.637%. It has fallen 32 basis points this month, the most since last August.
The yield on benchmark U.S. 10-year notes <US10YT=RR> rose 2.3 basis points to 4.23%.
Germany’s 30-year yield <DE30YT=RR>, 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 but set for a weekly gain. U.S. crude fell 0.33% to $64.39 a barrel and Brent fell to $68.24 per barrel, down 0.55% on the day.
(Reporting by Caroline Valetkevitch in New York. Additional reporting by Chuck Mikolajczak in New York and Marc Jones in London. Editing by Kirsten Donovan and Mark Potter)
