By Caitlin Ostroff and Akane Otani
U.S. stocks declined Friday but held on to their monthly gains after a streak of strong earnings.
The Dow Jones Industrial Average fell 181 points, or 0.5%, to 33879. The S&P 500 lost 0.7%, though finished April with its biggest monthly gain since November. The Nasdaq Composite declined 0.9%.
Investors have spent much of the month grappling with two competing dynamics: signs of a strong economic rebound, particularly in the U.S., and worsening Covid-19 cases elsewhere in the world that threaten to hamper the global recovery. Robust corporate earnings have helped major indexes hit records throughout the month. Data have also been encouraging, with figures released Friday showing U.S. household income surged by a record 21% in March.
But more recently, a surge in Covid-19 cases in Brazil and India and signs of weakening in China's manufacturing sector have sapped some of investors' optimism.
"That is where the market is, wrestling between those two [factors]," said Edward Park, chief investment officer at Brooks Macdonald.
Money managers say they will be closely watching whether disruptions in global supply chains, which have already led to a shortage of products like electronic chips, fuel inflation that could erode portfolio returns. If the supply constraints and inflationary factors extend into next year, "the growth parts of the markets, which are supported by this ultra cheap money environment, will struggle," Mr. Park said.
Shares of Twitter fell 14% after the social media company warned that user growth could cool in the coming quarters.
Amazon.com rose 0.9% after it reported record quarterly profit as demand remained strong for its deliveries, cloud-computing and advertising businesses.
Data-storage products company Western Digital rose 0.9% after posting quarterly results and an outlook that topped analysts' estimates.
Meanwhile, Clorox fell 2.6% after cutting its earnings forecast, citing pressure from higher commodities prices and freight costs.
"You're seeing a lot of companies reporting pricing pressures, supply chain disruptions, coupled with all this extra stimulus coming through from the U.S. that is why people are now really starting to focus on inflation," said Edward Smith, head of asset allocation research at U.K. investment firm Rathbone Investment Management.
"Persistent inflation beyond spring is the biggest risk to markets this year, because it could cause the Fed to taper and hike interest rates sooner than expected."
Overseas, the pan-continental Stoxx Europe 600 edged down 0.3%. Shares of British bank Barclays fell 7% as an unexpected rise in costs clouded the bank's quarterly earnings.
Most major indexes in Asia declined. New economic data from China weighed on sentiment, with official gauges for manufacturing falling short of expectations in April. China's statistics bureau said global chip shortages, international logistics jams and rising delivery costs have weighed on factory operations.
Increased costs for businesses due to supply-chain issues could be passed on to consumers, boosting prices, investors said.
Hong Kong's Hang Seng shed almost 2%. The Shanghai Composite Index, South Korea's Kospi and Japan's Nikkei 225 each fell 0.8%.
Write to Caitlin Ostroff at email@example.com and Akane Otani at firstname.lastname@example.org
(END) Dow Jones Newswires