S&P 500, Dow on Track for Weekly Declines

By Anna Hirtenstein and Michael Wursthorn

The S&P 500 bounced around the flatline Friday in another volatile trading session, leaving the broad index at risk of falling for a second consecutive week.

Technology and other growth stocks relinquished their earlier gains around midday, the same time bitcoin turned lower. The cryptocurrency was hit yet again on a statement from Chinese authorities that called for a crackdown on mining and trading. Gains across financial, energy and industrial stocks helped stabilize the S&P 500, leaving the index up 0.1%.

The Dow Jones Industrial Average maintained a modest gain, rising about 165 points, or 0.5%, while the Nasdaq Composite fell 0.3%.

Friday's lackluster performance leaves the S&P 500 down 0.3% over the past five trading days, marking another turbulent week of trading. The Dow, meanwhile, cut its loss for the week to 0.4% and the Nasdaq remained up 0.6%, on track for its first weekly gain out of the past five.

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 didn't help.

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 during the session until the minutes helped pare that decline to about 150 points.

Stocks got a bigger boost Thursday, which appeared to spill over somewhat into Friday's trading session. 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 stock market's daily swings are all signs 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 Bourbeua, a portfolio manager at ClearBridge Investments, adding that the market's drawdowns could "get a lot more painful from here."

After data on Friday 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," Mr. Ganesh said. Stocks that performed poorly during the pandemic could become the new drivers that lead major indexes higher, he added.

Financial stocks in the S&P 500 rose 0.9%, while shares of energy companies added 0.7%. Industrials and materials also traded higher, each gaining 0.5%.

Shares of tech companies, meanwhile, fell 0.3%, while consumer discretionary stocks slid 0.4%. Netflix and Google parent Alphabet both traded in the red after giving up earlier gains. Tesla's stock, which also slipped from its session highs, remained up just 0.1%.

Other movers included Oat-milk maker Oatly, which rose more than 8%. The shares jumped 19% in their trading debut on Thursday. And Nvidia shares rose 2.7% 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]

(END) Dow Jones Newswires

05-21-21 1517ET