S&P 500 closes lower Friday, but AI trade drives a 14.5% gain in first half of 2024: Live updates

U.S. stocks ticked down Friday as traders digested fresh economic data that indicated slowing inflation, as well as better-than-expected consumer sentiment figures. Traders also wrapped up a strong first half of 2024.

The S&P 500 slid 0.41% to close at 5,460.48, while the Nasdaq Composite declined 0.71%, ending at 17,732.60. The two averages hit new all-time intraday highs earlier in the session before pulling back. The Dow Jones Industrial Average dropped 45.20 points, or 0.12%, to settle at 39,118.86.

Inflation in May slowed to its lowest annual rate in more than three years, the Commerce Department reported on Friday. The core personal consumption expenditures price index, which excludes the more volatile food and energy prices, rose just 0.1% last month and 2.6% from the prior year. Both estimates were in line with the Dow Jones consensus estimates. The core PCE index is the Federal Reserve’s preferred inflation measure. Headline PCE, which includes food and energy, was flat on the month and up 2.6% on an annual basis, also in line with expectations.

“From the market’s perspective, today’s PCE report was near perfect,” said David Donabedian, chief investment officer of CIBC Private Wealth U.S. “This was unambiguously a positive report.”

The University of Michigan consumer sentiment index for June came in higher than expected, rising to 68.2 from the preliminary 65.6 reading. The one-year inflation outlook fell to 3% from 3.3% expected in May.

Inflation stats have been considered paramount by markets participants as they try to guess when the Federal Reserve will begin cutting interest rates. Traders are currently pricing in a 64.1% chance the central bank will lower rates at its September meeting, according to the CME Group FedWatch Tool.

The market officially concluded the first six months of 2024 with Friday’s closing bell.

The technology-heavy Nasdaq led the way over the first half, climbing 18.1% as the artificial intelligence craze captured investor excitement. The broad S&P 500 jumped 14.5%, while the blue-chip Dow lagged with a gain of about 3.8%. Nvidia shares inched down 0.4% on Friday.

The AI theme has “taken over this entire year and really propelled the concentration in the overall market,” said Mike Dickson, head of research and quantitative strategies at Horizon Investments. “That’s resulted in a really strong year.”

Part of the reason for the Dow’s underperformance stems from an idiosyncratic pullback in the second quarter. The Dow slipped 1.7% during the period, while the S&P 500 and Nasdaq added 3.9% and 8.3%, respectively, during the same timeframe.

All three have gained ground in June, marking their seventh positive month in eight. The Nasdaq once again led the pack with a month-to-date rally of nearly 6%. The S&P 500 and Dow gained 3.5% and 1.1%, respectively.

Week to date, the Nasdaq added 0.2%. The S&P 500 and the Dow inched lower by less than 0.1%.

“Equity markets have been resilient” in the first half of the year, said John Luke Tyner, portfolio manager at Aptus Capital Advisors.

For the market to reach bigger all-time highs in the final half of the year, Tyner thinks the market will need more participation. He noted that events such as the election, the timing of the rate cuts and indications of softening consumer demand could weigh on the markets.

“If all those things play out, we may see more volatility,” Tyner said. “All in all, everyone is enjoying the last 10 months of the market because it’s been easy, [but] at some point, the complacency will have to end.”

Nike shares slipped nearly 20% after the athletic retailer cut its full-year guidance. Foot Locker shares declined more than 2% in sympathy.