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Traders add to Fed rate cut bets as inflation eases

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Nike ( NKE ) slumps after results

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Infinera ( INFN ) jumps after Nokia to buy company

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Indexes down: Dow 0.3%, S&P 0.17%, Nasdaq 0.21%

(Updates throughout)

By Ankika Biswas, Lisa Pauline Mattackal and Carolina Mandl

June 28 (Reuters) -

U.S. stocks were muted on Friday after an early rally

fizzled as investors digested in-line inflation data, while Nike ( NKE )

was set for its steepest one-day fall in over two decades after

a gloomy forecast.

Volume is expected to surge toward the closing bell,

with potential volatility, as the FTSE Russell finalizes the

annual

reconstitution

of its indexes.

"The inflation numbers were exactly as we expected, so

they don't provide a catalyst to move up or down. It's not a

market moving event," said Steve Sosnick, chief strategist at

Interactive Brokers.

Data showed U.S.

monthly inflation

was unchanged in May, an

encouraging development

after strong price increases earlier this year raised

doubts over the effectiveness of the Federal Reserve's monetary

policy.

The Commerce Department report also showed consumer

spending rose marginally last month, fueling optimism that the

central bank could engineer a much-desired "soft landing" for

the economy.

Bets on a rate cut in September rose to 66% after the

personal consumption expenditures price index release, LSEG

FedWatch data showed.

John Kerschner, head of US securitized products at Janus

Henderson Investors, said in a note he will focus on Fed

officials' comments in the coming weeks to gauge the path of

monetary policy.

Traders have maintained bets on two cuts despite Fed

projections of just one this year, as they hope inflation will

keep cooling.

The S&P 500 energy and financials indexes

were the top sectoral gainers, while utilities fell to

the bottom with a 1.46% decline.

Some megacaps fell after Treasury yields reversed early

losses to inch higher. Meta Platforms ( META ), Alphabet

and Amazon.com ( AMZN ) fell between 0.84% and 1.55%.

San Francisco Fed President

Mary Daly

acknowledged the cooling inflation, and noted that it is

"good news that policy is working." Fed Governor Michelle Bowman

said the central bank would follow its own path as its inflation

goal has yet to be reached.

Nike ( NKE ) slumped 20.12% after forecasting a surprise

drop in fiscal 2025 revenue, weighing on the broader consumer

discretionary sector.

As of 02:33 p.m. ET, the Dow Jones Industrial Average

fell 118.99 points, or 0.30%, to 39,045.07. The S&P 500

lost 9.44 points, or 0.17%, at 5,473.43 and the Nasdaq Composite

fell 37.12 points, or 0.21%, to 17,821.56.

The S&P 500 and the Nasdaq indexes were set for

quarterly gains, but the Dow was on track to drop over

1%, highlighting the divergence between the more tech-heavy

indexes and the rest of the market.

Among individual stocks, optical networking gear maker

Infinera ( INFN ) jumped 17.78% after Nokia said it

would acquire the company in a $2.3 billion deal.

Advancing issues outnumbered decliners by a 1.32-to-1

ratio on the NYSE, which had 234 new highs and 65 new lows.

The S&P 500 posted 16 new 52-week highs and one new low

while the Nasdaq Composite recorded 49 new highs and 107 new

lows.