Wall Street’s rally fatigued for the first time in a week

US stocks remained near the flatline on Friday as a tech-led rally showed signs of fatigue for the first time in over a week. The benchmark S&P 500 shed nearly 0.2%, while the tech-heavy Nasdaq Composite lost 0.2%. The Dow Jones Industrial Average remained virtually unchanged.

Nvidia, which briefly became the world’s most valuable company this week, has led the AI-fueled rally, but it was down more than 3% on Friday. Other chip stocks, including Broadcom, Super Micro Computer, and Qualcomm, slumped with Nvidia in the early going.

Investors are also assessing the broader health of the US economy and the path for interest rates. Last week’s cool Consumer Price Index reading could pave the way for a rate cut in September. Around two-thirds of traders still expect rate cuts to begin then.

Earnings season has gone quiet, but Nike, Walgreens, FedEx, and General Mills are among the major tickers set to report next week. A significant economic indicator is on the horizon, with the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, being released on Friday. If Friday’s PCE reading also indicates a cooling of price pressures, it will give the Federal Reserve another reason to cut interest rates in the months ahead. Market bets currently predict central bankers to lower rates starting in September.

The US presidential campaign is also coming into view, with Joe Biden and Donald Trump facing off on CNN. Investors will get their first taste of the presidential debates on Thursday night, where they will discuss tax policy, global trade, the role of the Federal Reserve, and other economic issues.

Investors are buying into AI and Musk any way they can, with Elon Musk revealing that Super Micro will provide hardware for his AI startup, and Dell’s CEO saying his company would be building an “AI factory” for Musk’s xAI in partnership with Nvidia. Tesla, the parent company of Elon Musk, has been urged by shareholders to reverse the earlier ruling that invalidated its CEO’s pay package. The company believes it should now prevail in the case and will file a motion to reverse the ruling.

US stocks clung closely to the flatline to start the afternoon session on Friday as this month’s rally, led by the biggest tech names, paused as the week draws to a close. Bank of America economists forecast a “gilded glidepath” for the US economy, defined by continuing outperformance and the absence of a hard landing through the end of 2026. Central bankers predict that they will cut rates quarterly to land at a range of 3.5%-3.75% by 2026.