A recovery in tech stocks in the afternoon helped offset much of Friday’s market losses, though it was not enough to keep the major indexes from a second consecutive week of losses.
The S&P 500 rose 0.1% in the closing minutes of trading after dropping about 1% earlier in the day. The Nasdaq tech index returned after falling 0.8% and rose 0.6%. The Dow Jones Industrial Average fell 0.6%.
Rising tech stocks, as well as gains in energy and other sectors, helped outweigh declines in banks and other market sectors on a day when investors were mostly focused on company earnings reports and discouraging retail sales data.
A mixed close ended a week of volatile trading on Wall Street that exacerbated the January market downturn. The underlying S&P 500 index, which rose 26.9% in 2021, is now about 2.8% below the all-time high set on January 3rd.
“Stocks have clearly been falling slowly since the beginning of the year, but there may be good reason,” said Terry Sandwen, chief equity strategist at US Bank Wealth Management. “There may be some profit taking and time to digest after these high returns, especially as we move into a new regime of higher inflation and a less accommodative Federal Reserve.”
The S&P 500 rose 3.82 points to 4,662.85 and the Nasdaq rose 86.94 points to 14,893.75. The Dow fell 201.81 points to 35,911.81.
On Friday, the Commerce Department said retail sales fell 1.9% in December after Americans cut their spending due to food shortages, rising prices and the emergence of the omicron option.
“A lot of bad things can happen in a short amount of time during 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 after a weak retail sales report. Home Depot shares fell 3.9% and Whirlpool shares fell 4.3%.
The disappointing retail report is the latest in a series of economic reports this week that raised concerns about inflation and its impact on business and consumer spending.
The Labor Department said on Wednesday that consumer inflation rebounded at its fastest pace in nearly 40 years last month, up 7 percent from a year earlier, pushing up household spending and dampening wage growth. The government agency also said on Thursday that prices at the wholesale level rose by a record 9.7 percent for all of 2021.
Rising prices encourage businesses to pass on additional costs to consumers. Consumers are cutting spending at department stores, restaurants and online due to higher prices and shortages.
Businesses also feel the impact of inflation. Shares in paint maker Sherwin-Williams fell 2.8% after reporting disappointing fourth-quarter earnings due to raw material costs and supply chain issues. Shares of Boston Beer, maker of Sam Adams, shed 8.1% after lowering earnings guidance due to supply chain issues.
Concerns about ever-increasing inflation are also prompting the Federal Reserve to cut back on its bond purchases and consider raising interest rates sooner and more frequently than Wall Street expected less than a year ago.
“We think the backdrop is still favorable for (share) prices, but we are seeing a reset in estimates and this is a function of interest rates, which tend to be slightly higher,” Sandwen said.
Bond yields have risen. The 10-year Treasury yield rose to 1.79 percent from 1.70 percent at the end of Thursday.
JPMorgan Chase fell 6.2 percent, the biggest drop in the S&P 500 since reporting that its earnings fell 14 percent in the latest quarter from a year earlier as its trading business plummeted. Citigroup shares fell 1.3% after the release of the latest results.
A late surge in buying tech stocks helped mitigate market losses. Microsoft grew by 1.8 percent.
The price of crude oil in the US rose 2.1 percent, which helped boost shares in energy companies. Marathon Oil rose 4.9%.
Small stocks have also rebounded after an early fall. The Russell 2000 rose 3.02 points, or 0.1 percent, to 2162.46.
Damian J. Troise and Alex Veiga