Wall Street closes down as investors consider the presidential debate and inflation figures

Following an early rise that faded as investors processed in-line inflation statistics and assessed political uncertainties following the U.S. presidential debate, U.S. equities closed down on Friday.

Following a dire prediction, Nike (NYSE:NKE) had its biggest one-day decline in more than 20 years.

Ann Miletti, head of active equities at Allspring, said, "I don't think the percentage of inflation changes much because the Federal Reserve appears to be pretty serious about sticking to its 2% target and remains disciplined."

Data revealed that U.S. monthly inflation remained stable in May, which is a positive outcome given that significant price hikes earlier this year cast doubt on the Fed's monetary policy's efficacy.

The U.S. central bank's potential to provide the much-needed "soft landing" for the economy was bolstered by the Commerce Department data, which also revealed a little increase in consumer spending last month.

Following the publication of the personal consumption expenditures price index, the odds of a September rate drop increased to 66%, according to LSEG FedWatch data.

Despite the Fed's forecast of only one reduction this year, traders have kept their bets on two cuts in the hopes that inflation would continue to decline.

According to Thomas Martin, senior portfolio manager at Globalt Investments, the first debate between Republican opponent Donald Trump and US President Joe Biden on Thursday had a negative impact on markets due to the incumbent's unsteady performance.

"People are attempting to predict the outcome of the presidential election. Thus, after the discussion, there is more ambiguity rather than less, he said.

Treasury rates increased in the end, reversing early losses and putting further pressure on some megacap companies.

In addition to acknowledging the declining rate of inflation, San Francisco Fed President Mary Daly said that this is "good news that policy is working." Fed Governor Michelle Bowman said that because the bank has not yet achieved its inflation target, it would take its own course.

Utilities and communications services dropped 1.08% and 1.63%, respectively, while the S&P 500's best performers were energy and real estate, which were up 0.42% and 0.62%, respectively.

When Nike predicted an unexpected decline in fiscal 2025 sales, the company fell 19.98%, which had an adverse effect on the whole consumer discretionary market.

At 39,122.94, the Dow Jones Industrial Average dropped 41.12 points, or 0.11%. The Nasdaq Composite fell 126.08 points, or 0.71%, to 17,732.60, while the S&P 500 lost 22.57 points, or 0.41%, to 5,460.30.

When the FTSE Russell completed the reconstitution of its indexes, volume increased rapidly leading up to the closing bell. It was the year's second-largest day volume.

The S&P 500 and Nasdaq indices had increases of 3.9% and 8.3%, respectively, during the quarter. The 1.7% decline in the Dow brought attention to the differences between the more tech-heavy indices and the overall market.

Individual stocks saw a 15.78% increase after Nokia (HE:NOKIA) announced that it will purchase Infinera (NASDAQ:INFN), a manufacturer of optical networking gear, for $2.3 billion.

On the New York Stock Exchange (NYSE), advances outweighed decliners by a ratio of 1.29 to 1, with 271 new highs and 75 new lows.

The Nasdaq Composite had 58 new highs and 139 new lows, whereas the S&P 500 recorded 16 new 52-week highs and one new low.