U.S. stocks tepidly rose in early trade Friday but sharp losses in the financials sector following a mixed batch of corporate results from some of the nation’s biggest banks and poor data on retail-sales and inflation capped gains.
The Dow Jones Industrial Average traded around records, after logging its 24th record close this year on Thursday.
The blue-chip index DJIA, +0.37% was up 12 points, or less than 0.1% to 21,565. But losses in J.P. Morgan Chase & Co. JPM, -1.00% and Goldman Sachs Group Inc. GS, -0.40% were weighing on the index, shaving off nearly 30 points.
The S&P 500 index SPX, +0.40% was up 5 points, or less than 0.1%, at 2,453, with all but the financials, down 1%, while real estate and utilities shares were up 1% and 0.6%, respectively.
The Nasdaq Composite Index COMP, +0.45% picked up 19 points, or 0.3%, to 6,293, on track for its sixth-straight positive close.
Modest advances on Wall Street follow weaker-than-expected economic releases ahead of the bell. Inflation was flat, highlighting a sluggish price increases, while a reading of retail sales slumped, emphasizing persistent weakness in that sector and underlining consumer reluctance to spend freely. The patch of data raises some questions about the Federal Reserve’s ability to quickly normalize monetary policy, as it hopes to do, despite signs of anemic growth and stubbornly low inflation.
“Economic surprises continue to tilt toward the downside in the world’s largest economy, suggesting that the Federal Reserve’s hawkish stance earlier in the year could once again prove ill-founded,” said Karl Schamotta, market strategist at Cambridge Global Payments.
“Market participants are increasingly convinced that the central bank’s ‘dot plot’ rate forecast will be adjusted downward, with the yield curve coming under pressure as investors fade the likelihood of rapid monetary tightening,” Schamotta said.
The so-called dot plot refers to a plot of Fed member expectations for rates into the future, while the yield curve is a line that charts yields across every available maturity. A flattening yield curve, showing a narrowing premium between short-dated yields and long-dated Treasurys, has traditionally been viewed as a sign that investors are bearish on economic prospects.
For the week, the main equity indexes are on track to post solid gains, led by a 2.3% rise for the Nasdaq on the week, a 1.1% gain for the S&P 500 and a 0.7% climb for the Dow.
Lackluster economic data out Friday led to a firm drop in 10-year Treasury yields TMUBMUSD10Y, -1.30% meaning investors bought notes. Treasury yields fell to 2.28% at one point and currently stand at 2.32%. Bond prices and yields move inversely.
On Wednesday, dovish comments from Fed Chairwoman Janet Yellen in Capitol Hill testimony boosted helped to support hopes that the Fed would moderate its policies, which have been supportive to equity markets and bonds, if coming data proved weak. So far, Yellen has described economic weakness, notably slothful inflation, as temporary.
Stocks to watch: J.P. Morgan JPM, -1.00% beat expectations on both revenue and profit, but shares gave up an early initial gain to turn 1.6% lower.
Citigroup Inc. C, -0.43% reported earnings that were better than expected, but it did show signs of a slowdown in trading, with overall trading revenue down 4% and fixed-income trading revenue off 6%. Shares of the bank were trading up 1.2% lower.
Wells Fargo & Co. WFC, -1.17% reported second-quarter results that were better than expected but shares fell 1.9%.
Ahead of those results, Wall Street had been expecting banks to deliver a weak quarter, potentially kicking off the latest in a string of disappointing earnings seasons. The shine has come off the sector as hopes have faded that President Donald Trump will push through structural reforms and boost the economy. Disappointment from banks could weigh on the broader market, warned some.
Economic reports The consumer-price index, or cost of living, was unchanged last month, largely due to lower gasoline prices. Economists polled by MarketWatch expected the consumer-price index to rise 0.1% month-on-month in June, while core inflation was seen coming in at 0.2%.
Sales at retailers nationwide fell 0.2% last month to mark the second straight drop and match the biggest decline of the year
Other markets: In Asia ADOW, +0.66% markets ended the day with modest gains. European stocks SXXP, +0.18% stocks were mixed, but still looking at the best week in two months. A stronger British pound GBPUSD, +1.0665% was weighing on the FTSE 100 UKX, -0.47% for a second day.
The ICE Dollar index fell 0.5% to 95.24, its lowest level in 10 months.