Stocks opened higher Friday after mixed inflation data and news that the U.S. and China are making progress with trade negotiations.
However, the main benchmarks turned lower in afternoon trading after President Donald Trump said he is ending trade talks with Canada.
Ahead of the open, the Bureau of Economic Analysis said the Personal Consumption Expenditures (PCE) Price Index rose 0.1% from May to June. On an annual basis, headline inflation increased 2.3%. The results were in line with what economists expected.
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However, core PCE, which excludes volatile food and energy prices, was up 0.2% month over month and 2.7% year over year – quicker than anticipated.
The report also showed that consumer spending and personal income fell in May.
Michael Pearce, deputy chief U.S. economist at Oxford Economics, notes that the majority of the decline in consumer spending and income can be traced back to temporary factors, such as a "drop back in auto sales following the tariff front-running" in March and April.
Still, the economist believes "the trend in parts of discretionary spending has weakened, and we expect a further slowdown in the coming months as tariffs begin to weigh on real disposable incomes."
Even with signs of a slowing economy, Pearce thinks "the upside risks to inflation will keep the Fed on the sidelines until much later in the year."
According to CME Group's FedWatch, futures traders expect the next quarter-point rate cut to come at the Fed's September meeting.
U.S. touts China trade progress, ends talks with Canada
Encouraging U.S.-China trade news lifted sentiment early on, with both countries agreeing to terms that will accelerate rare earths exports to the U.S. and ease restrictions against China on trade exports.
But stocks turned lower after President Trump's mid-afternoon post on Truth Social stated that the U.S. is "terminating ALL discussions on Trade with Canada, effective immediately."
Trump said this is due to a "Digital Services Tax" Canada is levying on "our American Technology Companies, which is a direct and blatant attack on our Country."
The president added that Canada will be informed within the next seven days of the "the Tariff that they will be paying to do business with the United States of America."
Despite slipping into negative territory in mid-afternoon trading, the S&P 500 finished the day up 0.5% at 6,173 and the Nasdaq Composite added 0.5% to 20,273, new all-time closing highs for each index.
The Dow Jones Industrial Average added 1% to end at 43,819, less than 3% below its record closing high of 45,014.04 from December 4.
Beaten-down Nike gets upgraded to Buy
Nike (NKE) was far and away the best Dow Jones stock on Friday, surging 15.3% after the athletic apparel and footwear maker disclosed its fiscal fourth-quarter results.
While earnings per share and revenue were both down year over year, they came in higher than analysts expected. Additionally, Chief Financial Officer Matthew Friend said in Nike's earnings release that he expects "headwinds to moderate from here."
It's been a rough few years for Nike, which has seen its top and bottom lines hit by a laundry list of woes, including rising inflation, tensions between the U.S. and China and a lack of innovation.
And its share price has suffered as a result, dropping nearly 24% in the past 12 months.
But HSBC Global Research analysts think the blue chip stock has finally reached an inflection point, and upgraded it to Buy from Hold.
"We think there is more than tangible evidence that Nike has a path to see its sales rebound in the not-too-distant future, and its margins to be repaired, and this despite an unfavorable tariff headwind," they write in a note to clients.
HSBC adds that Nike appears to be "a battered leader with a convincing reboot," and that its "full refreshed team … is acting with speed and experience."
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