The US markets closed mostly lower on Friday, with the S&P 500 and Nasdaq both finishing slightly lower for week, while the Dow industrials finished at a record. The pullback in the broader stock market came amid a few blemishes in relatively strong earnings season showed that investors who are skittish about high valuations are taking money off the table while those who are more confident of earnings growth are supporting levels. The failure of a Republican-led attempt to repeal or replace the Affordable Care Act in the wee hours of Friday morning - viewed as a proxy for President Donald Trump's ability to deliver on previously pledged pro-growth legislations - may also have dampened investor sentiment. The New York Federal Reserve said its estimate on US gross domestic product for third quarter was little changed at about 1.9 percent based on the latest data on durable goods orders, new home sales and inventories. The regional central bank's 'Nowcast' model calculated the economy was expanding at an annualized pace of 1.92 percent in the third quarter, compared with 1.95 percent a week earlier.
On the economy front, the US grew at a 2.6% annual pace in second quarter, rebounding from soft patch at the start of the year. Consumer spending, the main engine of the economy led the way with a 2.8% increase. Business investment in equipment rose 8.2%, while outlays on structures advanced 4.9%. In a bit of a surprise, the value of inventories fell slightly to mark the second decline in a row. Investment in new housing also sank 6.8%. Exports rose 4.1% and imports edged up 2.1%. Inflation as measured by the PCE price index increased at a 0.3% annual rate. First-quarter GDP was revised lower to 1.2%. Separately, the cost of employing the average US worker rose 0.5% in the second quarter but showed little acceleration despite the tightest labor market in years. Over the past 12 months, employment costs have risen an unadjusted 2.4%. The ECI reflects how much companies, governments and nonprofit institutions pay their employees in wages and benefits. Wages - some 70% of employment costs - rose 0.5% in the second quarter. Benefits climbed 0.6%.
Meanwhile, Minneapolis Fed President Neel Kashkari said that the Federal Reserve's $4.5 trillion balance sheet is not doing a lot to boost the US economy at this time and trimming it gradually is the right thing to do. Kashkari has dissented on both of the US central bank's rate hikes this year, saying he wanted to wait to see if the recent weakness in inflation is transitory. But earlier this week he voted with fellow policymakers on a plan to begin reducing the Fed's bond holdings relatively soon, language that Wall Street has interpreted to mean September. Kashkari's remarks shed little new light on the Fed's internal deliberations over why wage growth remains weak and inflation tepid in the face of healthy job growth.
The Nasdaq lost 7.51 points or 0.12 percent to 6,374.68, S&P 500 edged lower by 3.32 points or 0.13 percent to 2,472.10, while the Dow Jones Industrial Average added 33.76 points or 0.15 percent to 21,830.31.