Stocks gave up early gains and closed lower, a downbeat end to the market's first losing month since February. The S&P 500 ended with a loss of 0.2%, breaking a four-day winning streak. The Dow fell 168 points, or 0.5%. The Nasdaq edged up 0.1%. Treasury yields fell. The government reported that the measure of inflation that's closely tracked by the Federal Reserve remained low last month. That's the latest sign that price increases are cooling. Investors are hoping the Fed may be close to done raising interest rates. Discount retailer Dollar General sank 12.2% after cutting its profit forecast for the year.
THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.
Stocks turned mixed on Wall Street in afternoon trading Thursday, on their way to closing out what has been a mostly miserable August.
The S&P 500 was up 0.2% after wavering between small gains and losses. The benchmark index is on track for its first monthly loss since February, though gains earlier this week helped chip away at the severity of the decline.
The Dow Jones Industrial Average fell 31 points, or 0.1%, to 34,859 as of 2:22 p.m. Eastern. The Nasdaq composite rose 0.5%.
Technology and communications stocks notched some of the biggest gains. Software company Salesforce rose 3.4% after raising its profit forecast for the year. Cloud-based security company CrowdStrike jumped 8.8% after reporting strong financial results.
Dollar General was among several retailers slipping after reporting weak earnings and forecasts. It slumped 12.5% after cutting its profit forecast for the year.
The government reported that a measure of inflation closely tracked by the Federal Reserve remained low in July. The latest update for personal consumption and expenditures, or the PCE report, is the latest sign that price increases are cooling. Investors are hoping the Fed may be close to done raising interest rates.
The central bank has raised its main interest rate aggressively since 2022 to the highest level since 2001. The goal has been to rein inflation back to the Fed's target of 2%. PCE measured 3.3% in July, matching economists expectations. That's down from 7% a year ago.
The latest inflation data follows updates on jobs and consumer confidence this week that also supports hopes for the Fed to pause interest rate hikes. The central bank held rates steady at its last meeting and is expected to do the same in September. Investors are expecting rates to hold steady for the remainder of 2023, according to CME's FedWatch tool.
The Fed has maintained that it is ready to keep raising interest rates if it has to, but will base its next moves on the latest economic data.
"The last hike they made potentially could be the last for the year," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. "As long as inflation remains controlled and contained, I think the Fed is done raising interest rates."
Bond yields edged lower. The yield on the 10-year Treasury slipped to 4.09% from 4.11% late Wednesday. The yield on the 2-year Treasury, which tracks expectations for the Fed, edged lower to 4.86% from 4.88% late Wednesday.
Wall Street has one more big economic update to look forward to this week. On Friday, the government will report employment data for August. The strong job market, along with consumer spending, has so far helped thwart a recession that analysts expected at some point in 2023. But, they also made the Fed's task of taming inflation more difficult by fueling wage and price increases.
The Fed is hoping that it can accomplish taming interest rates without sending the economy into a recession. The likelihood of a recession, or at least a severe one, has seemingly been fading and in turn fueling confidence in the market in 2023, despite the recent August slump.
"Sooner or later you need to have a pullback," Zaccarelli said. "The market can't go up in a straight line all the time."
Markets in Europe mostly fell. Annual inflation there held steady in August as food prices raced ahead of falling fuel costs, but there was no clarity about whether the European Central Bank will pause its record series of interest rate hikes.
Asian markets were mixed.
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Joe McDonald and Matt Ott contributed to this report.