US stock indices gave up gains on Friday as worse-than-expected consumer sentiment overshadowed strong retail sales and earnings reports.
The Dow lost about 60 points, or 0.17%, after opening above the 35,000 mark. The S&P 500 was down around 0.1% and the Nasdaq Composite was trading near the flatline.
The S&P 500 and Nasdaq Composite are well on their way to end the week down 0.3% and 1.2% respectively. The Dow is little changed during the week.
The University of Michigan’s US Consumer Sentiment Index was 80.8 for the first half of July, down from 85.5 the previous month, and worse than estimated by economists who forecast an increase.
The poll released on Friday showed inflation expectations are rising, with consumers believing prices will rise 4.8% over the next year, their highest level since August 2008.
“That weakness is hard to offset at face value with the acceleration in employment growth and the continued resilience of the stock market,” said Andrew Hunter, senior US economist at Capital Economics, of these positive trends.
The latest inflation data, released earlier this week, showed the consumer price index rose 5.4% yoy in June, the fastest increase in nearly 13 years.
Inflation fears appeared to overshadow a report released Friday of strong retail sales and signals of improvement in employment. Retail and hospitality sales rose 0.6% in June, while economists polled by Dow Jones had expected a decline of 0.4%. Initial jobless claims published on Thursday stood at 360,000 for the week ending July 10, the lowest level since March 14, 2020.
The weaker performance of technology stocks also weighed on the market. Netflix shares fell ahead of the streaming giant’s earnings report for the second quarter next week. The Nvidia share also collapsed.
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Investors digested strong earnings results from the first big week of the second quarter reports. While some of the country’s largest companies posted healthy profits and revenues amid the economic recovery, the stock market response has so far been muted.
The Financial Select Sector SPDR Fund is down about 0.8% this week, despite strong earnings growth numbers from companies like JPMorgan Chase and Bank of America.
For 18 S&P 500 companies that beat analyst estimates for second-quarter earnings this week, average earnings per share were 18% higher than expected. But these companies saw their stocks decline an average of 0.58%, according to the report.
Much of the market’s upward pressure over the past week has come from a handful of mega-capped internet and communications stocks. Apple, Netflix, Google mother Alphabet, and Microsoft are all up this week.
– CNBC’s Michael Bloom contributed to the coverage.
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