U.S. stocks traded mixed ahead of a new month of trading after Wall Street’s major indexes posted strong gains in May.

Bets on a rate cut in September increase after PCE data

Wall Street indexes rose on Friday after data on the personal consumption expenditures price index, which is the Fed’s preferred indicator, met expectations for April.

The PCE reading indicated a small cooling in inflation, although it remained above the Fed’s 2% annual inflation target.

Consequently, this data, along with other recent indicators of a tightening U.S. economy, prompted some bets that the central bank will begin cutting interest rates by September.

According to CME’s FedWatch tool, market traders estimate about a 47% chance of a 25-point cut in September, and about a 45% chance that the Fed will hold. These estimates served to boost U.S. stocks.

The S&P 500 index rose by nearly 0.8% on Friday to 5,277.5 points, while the Dow Jones Industrial Average rose by 5.1% to 38,686.32 points. The NASDAQ Composite index lagged behind as a result of the weakness in technology stocks and ended flat at around 16,735.02 points.

Non-Farm Payrolls and Federal Reserve meeting coming up

Market analysts are now focusing their attention on the upcoming May nonfarm payrolls data due later this week, which will give more clues about the labor market, another key factor for the Fed when it comes to cutting interest rates.

The Fed is meeting next week and all indications are that it will leave rates unchanged, though any comments about upcoming rate decisions will be the subject of much attention.

Fed policymakers have continued to call for patience in cutting rates, noting that they would like to see more signs that inflation continues to move steadily toward the 2% target.