MSCI'S global equities ended Friday's choppy session slightly lower as investors prepared for a likely US government shutdown and adjusted portfolios for the quarter's end.
Hardline Republicans in the US House of Representatives on Friday afternoon rejected their leader's proposed bill to temporarily fund the government, making it all but certain that federal agencies will partially shut down beginning on Sunday.
Underlying US inflation pressures moderated in August, with the annual rise in prices excluding food and energy falling below 4.0% for the first time in more than two years - seen as welcome news for the Federal Reserve as it ponders the monetary policy outlook.
Earlier data also showed headline inflation in Europe rising more slowly than expected and at its lowest level in two years.
But an earlier boost to stocks from signs of subsiding inflation faded as the session wore on.
While New York Fed President John Williams said the central bank is likely at or near peak rates, he said he still expects it will need to stay restrictive "for some time."
"What's driving everything is interest rates, and what the Fed finally got markets to buy is that lower inflation is not a reason to lower interest rates," said Robert Phipps, director at Per Stirling Capital Management, who saw the comments by Williams as the biggest drag on stocks on Friday as it reminded investors that rates will likely stay higher for longer.
On top of this, Phipps also cited end-of quarter portfolio adjustments, the prospect of a government shutdown, and an expansion of Detroit's auto workers' strikes as incentives for traders to sell shares going into the weekend.
Traders were betting on an 85.8% probability that the Fed would keep rates steady at its next meeting in November compared with an 80.7% probability on Thursday, according to the latest data from CME Group's Fedwatch tool.
The Dow Jones Industrial Average fell 158.84 points, or 0.47%, to 33,507.5, the S&P 500 lost 11.65 points, or 0.27%, to 4,288.05 and the Nasdaq Composite added 18.05 points, or 0.14%, to 13,219.32.
MSCI's gauge of stocks across the globe shed 0.04% on the day. For the month of September it fell 4.3%, which was its biggest monthly decline in a year. For the quarter it lost 6.6%, for its first quarterly decline in a year.
In currencies, the dollar was headed for its biggest quarterly gain in a year and gains for the 11th consecutive week while Japan's yen remained under scrutiny for potential government intervention.
The yen weakened 0.07% versus the greenback at 149.43 per dollar. The dollar index, which measures the greenback against a basket of major currencies, rose 0.038%, with the euro up 0.09% to $1.0568.
Sterling was last trading at $1.22, up 0.02% after data showed Britain's economic performance since the start of the COVID-19 pandemic was stronger than previously thought.
In U.S. Treasuries, Benchmark 10-year yields were well above their lows of the day but still down 1.6 basis points at 4.581%, from 4.597% late on Thursday. The 30-year bond was last down 2.3 basis points to yield 4.7065%. The 2-year note was last was down 1.3 basis points to yield 5.0582%.
In energy markets, U.S. crude oil prices settled 1% lower due to macroeconomic concerns and profit taking, but rose about 30% for the quarter as OPEC+ production cuts squeezed global crude supply.
U.S. crude settled down 1% at $90.79 per barrel and Brent ended at $95.31, down 0.07% on the day.
In precious metals, gold prices were lower on the day and eying monthly and quarterly declines on expectations that the U.S. central bank may keep interest rates higher for longer.
Spot gold dropped 0.9% to $1,848.59 an ounce. U.S. gold futures fell 0.77% to $1,846.10 an ounce.
