Wall Street ended the week with a lackluster session on Friday as investors were cautious ahead of a holiday weekend in which a fresh round of U.S. tariffs on Chinese imports were due to be levied.

While the S&P 500 registered its largest weekly gain since June, August had its biggest monthly decline since May. The financial markets will be closed on Monday for the Labor Day holiday.

At the same time, a new round of tariffs on some Chinese goods are expected to come into effect on Sunday. 

Trading volume was light as and the S&P swapping between negative and positive territory in the afternoon to end the day with little progress.

The United States and China had given hopeful signs on trade on Thursday as they discussed the next round of in-person negotiations in September.

Consumer spending increased solidly in July as households bought a range of goods and services. While this could allay financial market fears of a recession, a survey from the University of Michigan, also out Friday, showed its consumer sentiment index in August dropping by the most since December 2012, amid nerves over the U.S.-China trade war.

The Consumer Discretionary sector index was the S&P’s worst drag as Ulta , which had been the S&P’s top performing stock in Wall Street’s decade-old bull market, fell 29.6% after the cosmetics company cut its full-year earnings forecast.

One of the largest percentage gainers on the benchmark index was Campbell Soup, up 3.9% after its quarterly earnings number exceeded estimates.

Approximately 5.77 billion shares changed hands on the major domestic equity exchanges, as compared to the 7.13 billion share average for the past 20 trading days.

Consumer Spending Strong

Consumer spending increased solidly in July as households bought a range of goods and services, which could further allay financial market fears of a recession, but the strong pace of consumption is unlikely to be sustained amid tepid income gains.

The Commerce Department indicated on Friday morning that consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6% last month after an unrevised 0.3% gain in June. 

Consumer prices as measured by the personal consumption expenditures (PCE) price index rose 0.2% in July as a drop in the cost of food was offset by a surge in energy goods and services. The PCE price index edged up 0.1% in June.

In the 12 months through July, the PCE price index increased 1.4% after gaining 1.3% in June.

Excluding the volatile food and energy components, the PCE price index rose 0.2% last month, matching June’s increase. That kept the annual increase in the so-called core PCE price index at 1.6% in July.

The core PCE index is the Fed’s preferred inflation measure and has undershot the U.S. central bank’s 2% target this year.

When adjusted for inflation, consumer spending increased 0.4% in July. This so-called real consumer spending rose 0.2% in June. Last month’s jump in core consumer spending suggested consumption remained strong early in the third quarter after it surged at its fastest pace in 4-1/2 years in the second quarter.

Last month, spending on goods surged 0.9%, driven by outlays on recreational goods and motor vehicles. Spending on services increased 0.5%.

Consumer spending in July was supported by savings as personal income edged up 0.1%, the smallest rise since last September. That followed a 0.5% increase in June.

Wages increased 0.2% and personal interest income fell 1.8%. Savings fell to $1.27 trillion, the lowest level since November 2018, from $1.32 trillion in June.