By Damien J Trois and Alex Veiga
Wall Street mostly closed for a week of choppy trading with stocks on Friday, although gains for many tech companies pushed the Nasdaq Composite to another record high and close earlier than the 16,000 mark.
The S&P 500 index lost 0.1% a day after setting an all-time high. The Dow Jones Industrial Average fell 0.7% and the Nasdaq Composite gained 0.4%. Despite the week’s volatility, the S&P 500 and Nasdaq posted weekly gains, while the Dow posted its second straight weekly loss.
Some 66% of companies in the S&P 500 fell, with financial and energy stocks being a hotbed of pullbacks. Those losses outweighed a mix of gains in technology and companies that rely on consumer spending.
Investors continued to review earnings from a range of retailers to essentially close out the latest round of corporate report cards. They are also focusing on potential risks to the economy and corporate profits from rising inflation, which has pushed stocks on a bumpy path after weeks of solid gains.
“There are still broad results and outlook on whether inflation is becoming more inherent and sustainable or will be temporary,” said Bill Northey, senior investment director at US Bank Wealth Management.
The S&P 500 fell 6.58 points to end at 4,697.96. The Dow fell 268.97 points to end at 35,601.98, its third consecutive decline. The Nasdaq closed 63.73 points higher at 16,057.44 for its sixth straight gain.
Shares of the smaller company declined more than the broader market. The Russell 2000 Index was down 20.43 points, or 0.9%, at 2,343.16.
The yield on the 10-year Treasury fell to 1.54% from 1.59% late Thursday. Falling bond yields hit banks, which depend on higher yields, to charge more attractive interest on loans. JPMorgan Chase dropped 1.3%.
US crude oil prices fell 3.7% as energy stocks fell. Exxon Mobil dropped 4.6%.
The S&P 500 jumped 10.1% for the biggest gain ever after TurboTax maker Intuit raised its profit forecast for its fiscal year. Software maker Adobe climbed 2.6%.
Many companies that rely on direct consumer spending for goods and services have also grown. Tesla rose 3.7% and Nike 2.1%.
Moderna climbed 4.9% and Pfizer fell 1.2% after the Food and Drug Administration opened up coronavirus booster shots from both companies to all adults.
US stocks have been mostly bullish since early October as companies posted stronger-than-expected profits. More than 95% of the companies in the S&P 500 have reported their latest quarterly results in recent weeks, leading to a nearly 40% increase in total earnings. It beats analysts’ forecasts for 23% growth made back in June.
Nevertheless, companies continue to face high raw material costs and supply chain problems that could curtail future profits. Consumers have absorbed the higher prices so far, but analysts fear that if high prices persist for too long they may eventually rein in their spending.
The situation is putting pressure on the Federal Reserve to move quickly to rein in its ultra-low-rate policies to deal with rising prices. On Friday, Bank of America analysts forecast that the Fed will likely start raising its benchmark interest rate in the second quarter of 2022, earlier than they had previously forecast.
Businesses are facing high raw material costs and supply chain problems that are cutting operations. This has raised concerns that a wide range of industries could stunt growth by 2022.
The latest examples include Williams-Sonoma. The seller of cookware and home goods warned investors that supply chain problems could hurt its inventory by the middle of next year. The stock dropped 1.5%.
Applied Materials fell 5.5% after reporting weak financial results and disappointing profit forecasts partly due to supply chain problems.
“Those (supply chain) problems will become apparent over time, but they may not become apparent in time for the holiday season,” Northey said. “This may lead to demand not being met or shifting to early next year.”
Wall Street is also concerned that consumers are ultimately holding back from spending due to higher prices. The Labor Department said prices for US consumers rose 6.2% in October from a year earlier, leaving households facing their highest inflation rate.
Higher prices have yet to derail consumer spending, and retail sales rose 1.7% in October, according to the Commerce Department. It was the biggest month-on-month gain since March.