Dow Jones, S&P 500 register mild gains ahead of US inflation data

The S&P 500 closed slightly higher on Friday but well below its session high and all three of Wall Street's major averages posted weekly declines as investors worried about interest rates and waited anxiously for upcoming U.S. inflation readings.

Investors worried about rising oil prices and have been fretting ahead of the Consumer Price Index (CPI) for August, due out on Sept. 13, seeking signals about the Federal Reserve's likely moves on interest rates.

While traders bet on a roughly 93 per cent probability the Fed keeps rates at current levels after its next meeting ends on Sept. 20., they are pricing in a more divided 53.5 per cent chance for another pause at the November meeting, according to CME group's FedWatch Tool.

Yields on benchmark U.S. 10-year notes were lower, Friday's rise in U.S. 2-year Treasury yields appeared to pressure stocks. David Lefkowitz, head of US Equities at UBS Global Wealth Management, noted investors have been increasingly concerned about rising rates since early August.

"The tone has changed in recent weeks because of the move up in rates. People are questioning whether this is a risk to economic growth. Are higher rates going to lead to some slow down in conjunction with the dwindling of excess consumer savings," said Lefkowitz, who also cited concerns about high valuations in equities.

The Dow Jones Industrial Average (.DJI) rose 75.86 points, or 0.22 per cent, to 34,576.59, the S&P 500 (.SPX) gained 6.35 points, or 0.14 per cent, to 4,457.49 and the Nasdaq Composite (.IXIC) added 12.69 points, or 0.09 per cent, to 13,761.53.

For the week, which was shortened by Monday's Labor Day holiday, the S&P 500 fell 1.3 per cent, while the Nasdaq lost 1.9 per cent with both snapping two weeks of gains. The Dow fell 0.8 per cent.

Apple (AAPL.O) managed a small 0.3 per cent gain on Friday, though its close of $178.18 was about $2 below its session high as a rally lost steam. The iPhone maker fell sharply in the previous two sessions, pushing down the broader technology sector on news that Beijing had banned central government employees from using iPhones at work.

After losing 2.9 per cent in two sessions, the S&P 500 technology sector (.SPLRCT) closed higher. But energy (.SPNY), up 0.97 per cent, boasted the biggest percentage gains among the 11 S&P 500's industry sectors as oil prices rose.

Defensive utilities sector (.SPLRCU) had a daily gain of 0.96 per cent while the biggest decliner was real estate (.SPLRCR), which lost 0.63 per cent.

Along with three straight months of gains for crude futures and a positive start to September, this week's economic data also fueled inflation fears. Services activity data came in stronger than expected and weekly jobless claims fell.

"My expectation is that the CPI print could come in higher than expected (with) the price of oil pushing higher," said Phil Blancato, chief executive officer of Ladenburg Thalmann Asset Management.

"We have a problem where ultimately the Fed may be pushed into a corner, and while they might take a pause because of the lag effect, I don't think they're done."

Mixed comments from Fed officials have fueled uncertainty. New York Fed President John Williams kept his options open this week, while Dallas Fed President Lorie Logan said that while it "could be appropriate" to keep rates steady at the next meeting, more tightening might be needed.

In individual stocks, Kroger (KR.N) closed up 3 per cent after the retailer beat estimates for quarterly adjusted profit.

Gilead Sciences (GILD.O) added 2.8 per cent after BofA Securities upgraded the drugmaker to "buy" from "neutral."

GameStop (GME.N) finished down 6 per cent after a report that the U.S. Securities and Exchange Commission was investigating the videogame retailer's chairman, Ryan Cohen.

Advancing issues outnumbered declining ones on the NYSE by a 1.14-to-1 ratio; on Nasdaq, a 1.19-to-1 ratio favored decliners.

The S&P 500 posted 13 new 52-week highs and 17 new lows; the Nasdaq Composite recorded 36 new highs and 229 new lows.

On U.S. exchanges 8.89 billion shares changed hands compared to the 9.96 billion moving average for the last 20 sessions.