The S&P 500 ended lower on Friday, weighed down by Microsoft and other market heavyweights as comments from two Federal Reserve officials curtailed optimism that the central bank is nearing the end of its aggressive interest rate hikes.
The Nasdaq also ended the week lower, although the index and the S&P 500 remained near 14-month highs after economic data this week pointed to cooling inflation, eclipsing concerns about further rate hikes.
After holding rates steady on Wednesday, the U.S. central bank signaled borrowing costs could rise as much as half a percentage point by year-end. However, traders see the Fed pausing hikes or even cutting rates in December following an expected 25-basis-point rate hike in July, according CMEGroup's Fedwatch tool.
Fed policymakers on Friday attempted to cool that optimism. Fed Governor Christopher Waller warned "core inflation is not coming down like I thought it would." Richmond Fed President Thomas Barkin said he was "comfortable" with further rate increases given that inflation was still not on the path back to 2%.
"I think the Fed will continue to jawbone the market's enthusiasm down and say 'No, we plan on raising two more times, but of course we are data dependent,'" said CFRA Research Chief Investment Strategist Sam Stovall.
U.S. consumers' near-term inflation expectations dropped to a more than two-year low in June and the outlook over the next five years improved slightly, according to the University of Michigan's survey that also showed sentiment perking up.
A 1.7% decline in Microsoft Corp and a 1.3% dip in Amazon.com Inc weighed on the S&P 500 and the Nasdaq. Microsoft's stock on Thursday closed at its highest level ever.
Nvidia Corp edged up 0.1% after Morgan Stanley hiked its price target and named the chipmaker its top pick among U.S. semiconductor firms.
U.S. stock markets will be closed on Monday for the Juneteenth holiday.
S&P 500 fell 0.36% to end the session at 4,409.77 points.
The Nasdaq declined 0.68% to 13,689.57 points, while the Dow Jones Industrial Average declined 0.31% to 34,301.03 points.
Volume on U.S. exchanges was heavy amid the simultaneous expiration of stock options, stock index futures and index options contracts. Nearly 17 billion shares were traded, compared to an average of 11 billion shares over the previous 20 sessions.
Of the 11 S&P 500 sector indexes, eight declined, led by communication services, down 1%, followed by a 0.83% loss in information technology.
For the week, the S&P 500 rose 2.6%, the Dow added 1.2% and the Nasdaq gained 3.2%.
Fueled by recent strong gains in Nvidia and other megacaps, the Nasdaq logged its eighth consecutive week of gains, its longest streak of weekly advance since March 2019.
The benchmark S&P 500's weekly gain was its fifth in a row.
Adobe Inc rose 0.9% after the Photoshop maker's earnings forecast surpassed analysts' estimates.
iRobot Corp surged 21% after Britain's competition regulator cleared Amazon's planned $1.7 billion acquisition of the vacuum cleaner maker.
Micron Technology fell 1.7% after warning of a bigger hit to global revenue from a Chinese ban on the sale of its memory chips to key domestic industries.
Declining stocks outnumbered rising ones within the S&P 500 by a 1.4-to-one ratio.
The S&P 500 posted 24 new highs and no new lows; the Nasdaq recorded 112 new highs and 67 new lows.
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