The S&P 500 will end lower as Microsoft has pulled back from a record low

June 16 (Reuters) – The S&P 500 closed lower on Friday dragged down by Microsoft and other market heavyweights as comments from two Federal Reserve officials dampened optimism that the central bank was nearing the end of its large interest rate hikes.

The Nasdaq (.IXIC) also ended the week lower, although the index and the S&P 500 remained near 14-month highs after economic data this week indicated slowing inflation, outweighing concerns about more interest rate hikes.

After keeping interest rates steady on Wednesday, the US central bank indicated that borrowing costs could rise by half a percentage point by the end of the year. However, traders are seeing the Fed pause increases or even cut interest rates in December after an expected 25 basis point hike in July, according to Reuters. CMEGroup’s Fedwatch tool.

On Friday, federal policymakers tried to temper that optimism. Fed Governor Christopher Waller warned that “core inflation will not go as low as I thought.” Richmond Fed President Thomas Barkin said he was “comfortable” with further interest rate increases given that inflation is still on its way back to 2%.

“I think the Fed will continue to dampen market enthusiasm and say ‘No, we’re planning to increase two more times, but of course we’re data-driven,'” said Sam Stovall, chief investment strategist at CFRA Research.

Near-term inflation expectations for US consumers fell to their lowest level in more than two years in June and expectations over the next five years have improved slightly, according to a University of Michigan survey that also showed sentiment improving.

A decline of 1.7% in Microsoft Corp (MSFT.O) and a decline of 1.3% in Amazon.com Inc (AMZN.O) weighed on the S&P 500 and Nasdaq. Microsoft stock closed Thursday at an all-time high.

Nvidia Corp (NVDA.O) rose 0.1% after Morgan Stanley raised its price target and named the chipmaker its top pick among US semiconductor companies.

US stock markets will be closed on Monday for the June holiday.

The S&P 500 fell by 0.36%, ending the session at 4,409.77 points.

The Nasdaq index fell by 0.68%, to 13,689.57 points, while the Dow Jones Industrial Average fell by 0.31%, to 34,301.03 points.

Trading volume on US stock exchanges was heavy amidst simultaneous expiration of stock options, stock index futures and index options contracts. Nearly 17 billion shares changed hands, compared to an average of 11 billion shares over the previous 20 sessions.

Of the 11 S&P 500 sector indices, eight declined, led by Communications Services (.SPLRCL), down 1%, followed by a 0.83% loss in Information Technology (.SPLRCT).

Over the course of the week, the S&P 500 rose 2.6%, the Dow Jones gained 1.2% and the Nasdaq gained 3.2%.

Buoyed by recent strong gains in Nvidia and other majors, the Nasdaq index posted its eighth straight week of gains, the longest streak of weekly advances since March 2019.

The S&P 500’s weekly gain was the fifth in a row.

Adobe Inc rose 0.9% after earnings forecasts for the Photoshop maker beat analysts’ expectations.

iRobot Corp (IRBT.O) stock jumped 21% after Britain’s competition regulator pulled Amazon (AMZN.O) from its $1.7 billion takeover plan for the vacuum cleaner maker.

Micron Technology (MU.O) fell 1.7% after warning of a bigger hit to global revenues from a Chinese ban on selling its memory chips to key domestic industries.

Declines outnumber gainers in the S&P 500 (.AD.SPX) by a ratio of 1.4 to one.

S&P 500 posted 24 new highs and no new lows; The Nasdaq index posted 112 new highs and 67 new lows.

Additional reporting by Sruthi Shankar and Shristi A. Ashar in Bengaluru and Noel Randwich in Oakland, California; Editing by Vinay Dwivedi and Richard Chang

Our standards: Thomson Reuters Trust Principles.