The S&P 500 and the Nasdaq gave up early gains Friday and were set to snap their five-week winning streaks, as investors evaluated the timing of rate cuts from the Federal Reserve following an inflation report largely in line with estimates.

After opening marginally higher, the indexes dropped to a two-week low, weighed by megacap growth names such as Alphabet, Amazon.com and Nvidia, which lost between 1.1% and 2.6%.

Technology led declines among the S&P 500 sectors, falling 1.5% and on track for its worst week in over a month, while the Philadelphia SE Semiconductor Index lost 2.6%.

U.S. inflation tracked sideways in April, a worrying sign for the central bank that suggests the elevated pace of price increases could last longer than expected, according to the Fed's preferred Personal Consumption Expenditure report.

"Progress on disinflation has clearly stalled this year," said Cameron Dawson, chief investment officer at Newedge Wealth.

"The inflation data is not hot enough to suggest that (the Fed) needs to hike rates again, but it's not cool enough to suggest that they can cut rates right away."

Still, expectations for a September rate cut climbed to over 55%, compared with 48.7% seen before the data, according to the CME FedWatch tool.

Tech and chip stocks, which have led Wall Street's recent rally, retreated this week as a spike in Treasury yields pressured riskier assets.

The blue-chip Dow fared better than its peers, helped by healthcare stocks. The S&P 500 healthcare sector was among the gainers, up 0.7%, along with real estate's 1.2% rise.

"Investors are starting to look for parts of the market where there's better value and they are rotating into those that have been laggards," said Garrett Melson, portfolio strategist at Natixis Investment Managers.

Further weighing on sentiment, the Chicago Purchasing Managers' Index fell to 35.4, significantly below the estimated reading of 41.

Comments from Atlanta President Raphael Bostic, a Federal Open Market Committee voting member, are expected later in the day.

At 12:07 p.m. EST, the Dow Jones Industrial Average was basically flat, up 0.06%; the S&P 500 was up 0.65%, but Nasdaq was down 1.43%.

Among big movers, Dell plummeted 22% after it forecast current-quarter profit below market estimates and signaled that higher costs to build servers that meet heavy AI workloads would dent its annual margins.

Zscaler jumped 6.5% after the security solutions provider forecast fourth-quarter results above estimates.

Gap surged 24.2% after the apparel maker raised its annual sales forecast and its first-quarter results beat market expectations, in fresh signs that its turnaround strategy was starting to work.

Trump Media & Technology Group fell 5.4% after a New York jury convicted former President Donald Trump of falsifying documents to cover up a hush money payment to a porn star ahead of the 2016 elections.

Advancing issues outnumbered decliners by a 1.84-to-1 ratio on the NYSE and by a 1.17-to-1 ratio on the Nasdaq.

The S&P index recorded eight new 52-week highs and six new lows, while the Nasdaq recorded 40 new highs and 59 new lows.