Stocks usually finish higher, but still have a losing week

A recovery in technology stocks in the late afternoon helped wipe out most of Friday’s market losses, although it wasn’t enough to prevent major indices from posting their second consecutive week of losses.

The Standard & Poors 500 gained 0.1% in the closing minutes of trading after falling about 1% earlier in the day. The tech-heavy Nasdaq bounced back from a 0.8% decline to gain 0.6%. The Dow Jones industrial average fell 0.6%.

The rally in technology stocks, plus gains in energy and other sectors, helped outweigh declines at banks and elsewhere in the market on a day when investors were mostly focused on a mix of corporate earnings reports and discouraging retail sales data.

The mixed finish closed out a week of choppy trading on Wall Street, exacerbating the markets’ slump in January. The benchmark S&P 500, which rose 26.9% in 2021, is now about 2.8% below its all-time high on January 3.

Obviously, stocks have had a slow start so far, but perhaps for good reason, said Terry Sandven, chief equity strategist at US Bank Wealth Management. It may take some profit taking and time for digestion after those strong returns, especially as we moved 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, while the Nasdaq rose 86.94 points to 14,893.75. The Dow fell 201.81 points to 35,911.81.

Shares of smaller companies also recovered from an early decline. The Russell 2000 index rose 3.02 points, or 0.1%, to 2,162.46 points.

The Commerce Department reported Friday that retail sales fell 1.9% in December after Americans cut spending amid product shortages, rising prices and the onset of the Omicron variant of the coronavirus.

That’s a lot of bad things that can happen in a short amount of time in one of the strongest shopping months of the year, said Robert Cantwell, portfolio manager at Upholdings.

A wide variety of retailers and other businesses that rely on direct consumer spending fell after the weak retail sales report. Home Depot was down 3.9% and Whirlpool was down 4.3%.

The disappointing retail report is the latest in a series of economic reports this week that raise concerns about inflation and its effect on business and consumer spending.

The Labor Office reported this on Wednesday consumer inflation jumped last month at the fastest pace in nearly 40 years, up 7% from a year earlier, pushing household spending up and hurting wage growth. The government agency also reported on Thursday that: wholesale prices rose with a record 9.7% for all of 2021.

Rising prices have prompted companies to pass on more costs to the consumer. Consumers have withdrawn from spending in department stores, restaurants and online due to higher prices and supply shortages.

Companies are also feeling inflation. Paint maker Sherwin-Williams fell 2.8% after disappointing fourth quarter results due to raw material costs and supply chain issues. Boston Beer, which makes Samuel Adams beer, fell 8.1% after it slashed its profit forecast due to supply chain problems.

Concerns about continued rising inflation are also leading to the Federal Reserve to cut its bond purchases and consider raising interest rates earlier and more frequently than Wall Street had anticipated less than a year ago.

Our belief is that the background is still favorable for: [stock] prices, but saw a reset in valuations, and that’s a function of interest rates moving a little higher, Sandven said.

Bond yields rose. The 10-year Treasury yield rose to 1.79% from 1.70% at the end of Thursday.

JPMorgan Chase fell 6.2% for the biggest drop in the S&P 500 after reporting profits were down 14% in the last quarter from a year earlier when trading activity collapsed. Citigroup fell 1.3% after announcing its latest results.

The late burst of buying technology stocks helped dampen market losses. Microsoft rose 1.8%.

The price of US crude rose 2.1% and helped propel energy stocks higher. Marathon oil rose 4.9%.