Wall Street shows mixed response, dollar gains after inflation data

Wall Street lost earlier momentum and the dollar bounced back on the last trading day of August, as closely-watched inflation data offered few surprises and bolstered the likelihood that the Federal Reserve will press the policy pause button at next month's monetary policy meeting.

The tech-laden Nasdaq was modestly higher, the S&P 500 was essentially flat, while the Dow turned negative.

All three indexes remain on course to notch losses for the month, with the S&P 500 suffering its biggest percentage drop since February and the tech-laden Nasdaq clocking its largest slide this year.

"In August, a little bit of enthusiasm surrounding AI and the big tech names has been digested," said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. "Investors are looking for a theme that broadens support beyond the big seven stocks that contributed the most to returns over the course of the year."

Among a smattering of U.S. economic reports, the Commerce Department's closely watched Personal Consumption Expenditures (PCE) price index - the Fed's preferred inflation yardstick - nailed consensus, soothing fears of an upside surprise, which could have helped provoke yet another interest rate hike in September.

"The PCE data came in inline with most expectations, and now we've got tomorrow's employment report and then CPI and PPI along the road to the next Fed meeting," Sroka added. "Employment has really been the missing piece for the Fed. The Fed says unemployment needs to rise and there needs to be more slack in the labor market to ease wage pressure. And we haven't seen that yet."

The Dow Jones Industrial Average fell 105.83 points, or 0.3 per cent, to 34,784.41, the S&P 500 lost 0.29 points, or 0.01 per cent, to 4,514.58 and the Nasdaq Composite added 40.23 points, or 0.29 per cent, to 14,059.54.

European shares reversed earlier gains to close lower as falling consumer staples and luxury stocks offset gains in financials and real estate.

The pan-European STOXX 600 index lost 0.20 per cent and MSCI's gauge of stocks across the globe shed 0.14 per cent.

Emerging market stocks lost 0.78 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.39 per cent lower, while Japan's Nikkei rose 0.88 per cent.

The greenback gained ground against a basket of world currencies in the wake of U.S. economic data, while the euro sagged following cautious comments by a leading European Central Bank hawk.

The dollar index rose 0.41 per cent, with the euro down 0.71 per cent to $1.0846.

The Japanese yen strengthened 0.59 per cent versus the greenback at 145.41 per dollar, while sterling was last trading at $1.2664, down 0.42 per cent on the day.

U.S. Treasury yields were last a bit lower in choppy trading after data reinforced expectations that the Fed will hold interest rates steady in September.

Benchmark 10-year notes last rose 7/32 in price to yield 4.0906 per cent, from 4.118 per cent late on Wednesday.

The 30-year bond last rose 14/32 in price to yield 4.2023 per cent, from 4.228 per cent late on Wednesday.

Oil prices jumped, boosted by a U.S. inventory drawdown and production cuts by the OPEC+ group of oil producing nations.

U.S. crude rose 2.45 per cent to settle at $83.63 per barrel, while Brent settled at $86.86 per barrel, up 1.16 per cent on the day.

Gold prices inched lower in the wake of the PCE report, in opposition to the dollar.

Spot gold was essentially flat, at $1,941.13 an ounce.