S&P 500 Declines to End Turbulent Week

By Anna Hirtenstein and Michael Wursthorn

The S&P 500 edged lower Friday in another volatile trading session as a continuing spring selloff knocked the broad index down for a second straight week.

Major stock indexes initially appeared set to extend Thursday's gains, but investors started selling technology and other growth stocks around midday, the same time bitcoin turned lower. The cryptocurrency was hit yet again, this time on a statement from Chinese authorities that called for a crackdown on mining and trading.

Value stocks in the financial and energy sectors held on to their gains, as investors continued to favor shares of economically sensitive companies poised to benefit from the continuing economic rebound. Economic data released Friday morning showing record manufacturing activity last month added further support for reopening stocks and kept the S&P 500 from falling further.

The broad index ended the session down 3.26 points, or less than 0.1%, at 4155.86. For the week, it dropped 0.4%, the first stretch of back-to-back losses since February's bout of volatility.

The Dow Jones Industrial Average notched a modest gain of 123.69 points, or 0.4%, to 34207.84, and the Nasdaq Composite slid 64.75 points, or 0.5%, to 13470.99. The Dow cut its loss for the week to 0.5%, while the Nasdaq added 0.3%, snapping a four-week losing streak.

Stocks were hammered earlier in the week over three days of selling on mounting concerns that inflation will rise and remain elevated as the economy rebounds. Falling bitcoin prices hurt sentiment as well.

Pressure started to ease Wednesday afternoon after the Federal Reserve published minutes of its latest policy meeting showing some officials were closely watching economic developments and will be ready to adjust monetary policy when necessary. The Dow industrials were down as much as 587 points at one point before the minutes helped pare that decline to about 150 points.

Stocks got a bigger boost Thursday, with the S&P 500 rising 1.1%. Jobless claims data, seen as a proxy for layoffs, fell to a new pandemic low, enticing investors to briefly buy the dip in hard-hit risky assets, including growth stocks and cryptocurrencies.

The volatility is a sign that the market is fatigued as it confronts a rebounding economy that threatens to eventually turn hot, inflaming inflation and frothy conditions among growth stocks, cryptocurrencies and other assets, investors said.

"It's the two big topics the market is wrestling with," said Peter Bourbeau, a portfolio manager at ClearBridge Investments, adding that the market's drawdowns could "get a lot more painful from here."

After Friday's data showed manufacturing activity continued to increase, investors focused their bets on sectors, including banking and energy, that could benefit as the economy rebounds to pre-pandemic levels.

The U.S. Composite Output Index climbed to its highest reading ever, surpassing April's previous record readout as business activity expanded rapidly.

"If we can get a combination of confidence that inflation is under control, and signs of economic momentum coming through, I think there is still good opportunities to be had, in the reopening type of sectors in particular," said Kiran Ganesh, a multiasset strategist at UBS Global Wealth Management. Stocks that performed poorly during the pandemic could become the new drivers that lead major indexes higher, Mr. Ganesh said.

Financial stocks in the S&P 500 rose 0.9%, while shares of energy companies added 0.2%. Industrials and materials also traded higher, gaining 0.4% and 0.3%, respectively.

Shares of tech companies, meanwhile, fell 0.5%, while consumer discretionary stocks slid 0.6%. Netflix and Google parent Alphabet both traded in the red after giving up earlier gains. Tesla, which also slipped from its session highs, closed down $5.90, or 1%, to $580.88.

Other movers included Oat-milk maker Oatly, which rose $2.26, or 11%, to $22.46. The shares jumped 19% in their trading debut on Thursday. And Nvidia rose $15.17, or 2.6%, to $599.67 after the chip maker unveiled plans for a 4-for-1 stock split.

"The context of this week is that markets are tired," said Paul O'Connor, head of a multiasset team at Janus Henderson. "Stocks keep losing momentum, speculative areas of the market are losing momentum."

Write to Anna Hirtenstein at [e-mail] and Michael Wursthorn at [e-mail]

Corrections and Amplifications

This article was corrected on May 24, 2021 because Peter Bourbeau's name was misspelled as Bourbeua.

(END) Dow Jones Newswires

05-21-21 1741ET