A late-afternoon recovery in technology stocks helped erase most of the market's losses Friday, though it wasn't enough to keep major indexes from posting their second straight losing week.
The S&P 500 eked out a 0.1% gain in the final minutes of trading after having been down about 1% earlier in the day. The tech-heavy Nasdaq came back from a 0.8% slide to post a 0.6% gain. The Dow Jones Industrial Average fell 0.6%.
The rally in technology stocks, plus gains in energy and other sectors, helped outweigh declines in banks and elsewhere in the market on a day when investors were mainly focused on a mix of company earnings reports and discouraging data on retail sales.
The mixed finish capped a week of choppy trading on Wall Street that deepened the market's January slump. The benchmark S&P 500, which soared 26.9% in 2021, is now about 2.8% below the all-time high it set Jan. 3.
“Stocks clearly are off to a slow start year-to-date, but perhaps for good reason,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "There’s perhaps some profit-taking and time needed for digestion following those strong returns, particularly as we’re moving into a new regime of higher inflation and a Federal Reserve that’s less accommodative.”
The S&P 500 rose 3.82 points, to 4,662.85, while the Nasdaq gained 86.94 points, to 14,893.75. The Dow fell 201.81 points, to 35,911.81.
The Commerce Department reported Friday that retail sales sank 1.9% in December after Americans cut their spending in the face of product shortages, rising prices and the onset of the omicron variant.
“That's a lot of bad things to happen in a short amount of time in one of the strongest retail months of the year,” said Robert Cantwell, portfolio manager at Upholdings.
A wide range of retailers and other companies that rely on direct consumer spending fell following the weak retail sales report. Home Depot fell 3.9% and Whirlpool fell 4.3%.
The disappointing retail report is the latest in a series of economic reports this week that has raised concern about inflation and its effect on businesses and consumer spending.
The Labor Department reported on Wednesday that consumer inflation jumped at the fastest pace in nearly 40 years last month, a 7% spike from a year earlier that is increasing household expenses and biting into wage gains. The government agency reported Thursday that prices at the wholesale level surged by a record 9.7% for all of 2021.
Rising prices have been prompting businesses to pass more costs on to consumers. Consumers have been pulling back on spending at department stores, restaurants and online as a result of higher prices and supply shortages.
Businesses are also feeling the effect from inflation. Paint maker Sherwin-Williams fell 2.8% after reporting disappointing fourth-quarter earnings because of raw-materials costs and supply-chain problems. Boston Beer, which makes Sam Adams beer, slid 8.1% after cutting its earnings forecast because of supply-chain problems.
Concerns about persistently rising inflation are also prompting the Federal Reserve to trim its bond purchases and consider raising interest rates earlier and more often than Wall Street had expected less than a year ago.
“Our belief is that the backdrop is still favorable for (stock) prices, but we’re seeing a reset in valuations, and that’s a function of interest rates trending a little higher,” Sandven said.
Bond yields rose. The yield on the 10-year Treasury rose to 1.79% from 1.70% late Thursday.
JPMorgan Chase slumped 6.2% for the biggest decline in the S&P 500 after reporting that its profits fell 14% in the latest quarter from a year earlier as its trading business slumped. Citigroup fell 1.3% after reporting its latest results.
The late burst of buying in technology stocks helped temper the market’s losses. Microsoft rose 1.8%
The price of U.S. crude oil rose 2.1% and helped send energy stocks higher. Marathon Oil rose 4.9%.
Smaller company stocks also bounced back from an early slide. The Russell 2000 index rose 3.02 points, or 0.1%, to 2,162.46.