Stocks on Wall Street gave up early gains and edged lower in afternoon trading on Friday, following a closely watched report that showed inflation continues easing. The S&P 500 index was down 0.3%, hovering around its all-time high, while the Nasdaq composite fell 0.3% but still remained close to its record high. The Dow Jones Industrial Average was down 152 points, or 0.4%, as of 3:15 p.m. Eastern.

According to the latest personal consumption expenditures index (PCE), consumer prices rose 2.6% in May compared to a year ago, indicating a continued easing from a reading of 2.7% in April and a significant decrease from the peak reading of 7.1% two years ago. This data is encouraging for economists and investors who are hoping for rate cuts to ease pressure on the market and borrowers. The PCE is the Federal Reserve's preferred measure of inflation.

"Inflation is moving in the right direction, and this is what the Fed needs to make a decision to cut rates," said Quincy Krosby, chief global strategist for LPL Financial. Wall Street is betting that the Fed will start cutting interest rates at its meeting in September.

Treasury yields in the bond market were initially mixed, but the yield on the 10-year Treasury rose to 4.35% from 4.30% after the release of the PCE data. The yield on the two-year Treasury, which closely tracks expectations for Fed actions, remained steady at 4.72%. The Fed had raised interest rates to their highest level in over two decades to combat inflation, but recent data suggests that pressure on prices has been easing.

The easing of inflation and a more cautious approach to consumer spending have allowed the market to perceive the possibility of a rate cut in September, Krosby added. Consumer spending in May remained stagnant compared to April, according to the latest government retail sales report.

In corporate news, Nike experienced a sharp decline of 20.7% in its stock value after failing to meet Wall Street's revenue targets and cutting its full-year sales guidance. The company cited a "challenging" environment and expects sales to decline by single digits in the current fiscal year. Other athletic apparel companies such as Foot Locker, Skechers, and Under Armour also saw declines in their stock prices.

Despite the pullback in the market, gains in technology and financial sector stocks, such as Salesforce and JPMorgan Chase, helped limit the overall losses in the S&P 500.

Looking ahead, Wall Street will closely follow updates on job openings, unemployment, and hiring next week as the strong jobs market has also shown signs of weakening.

Overall, with inflation continuing to ease and rate cut expectations rising, the market remains cautiously optimistic about the possibility of future monetary policy changes by the Federal Reserve.