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U.S. stock futures pause ahead of PPI, sentiment data

The Dow Jones Industrial Average was clinging to a modest gain Friday as another early intraday rally faded, while the S&P 500 index and Nasdaq Composite looked likely to cap off a second straight weekly loss.

What’s happening

  • The Dow Jones Industrial Average
    rose by 71 points, or 0.2%, to 35,250.

  • The S&P 500
    was off by 7 points, or 0.2%, to 4,460.

  • The Nasdaq Composite
    shed 97 points, or 0.7%, to 13,640.

The Dow was up 0.6% for the week, while the S&P 500 was down 0.3% on a weekly basis, according to FactSet data. The Nasdaq Composite was heading for its first back-to-back weekly losses in 2023.

What’s driving markets

U.S. stock indexes slipped Friday, a trend that’s taken hold in mid-August as technology shares slump, longer-dated Treasury yields rise, and investors consider if corporate earnings can hold up through the rest of this year.

“On balance, earnings haven’t been as bad as feared, but they’ve hardly been inspiring,” said Josh Jamner, ClearBridge Investments, adding that a broad-based theme from second-quarter earnings reports has been one of margin pressure, as higher interest rates from the Federal Reserve and a rebound in commodity prices take hold.

“Margin pressure is likely to continue,” Jamner said Friday. “That’s not baked into stocks.”

Fears about the potential for inflation to creep back up in the next few months was on the radar Friday, after the U.S. producer price index rose 0.3% in July. It followed Thursday’s promising report on consumer prices, which showed price growth was subdued at 0.2% for the second month in a row in July.

Read: Surprise rise in U.S. producer prices in July PPI was caused by jump in stock market

Friday’s PPI data, combined with a lackluster reading on consumer sentiment from the University of Michigan, helped rattle investors who have become too optimistic about the outlook for the U.S. economy and the Federal Reserve’s plans, said Gene Goldman, CIO of Cetera Investments.

Goldman pointed to volatility, including the S&P 500’s recent trend of surrendering weekly gains heading in the final stretch of trading, suggesting that investors are nervous about holding stock-market exposure over the weekend.

“The market has been ignoring all the bad news out there, they’ve been too optimistic about a soft landing,” Goldman said during a phone interview with MarketWatch. “The fact that stocks sold off again on Friday afternoon to me screams ‘uncertainty.’”

UMich sentiment data on Friday showed consumers’ outlook on the economy soured slightly since the beginning of August, while expectations for inflation over the next five years declined to 2.9% from 3%.

“I think the consumer sentiment data helped offset some of the negative news from today’s PPI report,” said Sam Stovall, chief investment strategist at CFRA Research, during a phone interview with MarketWatch. “However, it looks like the overall uncertainty trend is reasserting itself now that the S&P 500 is back in negative territory.”

Rising Treasury yields also added to the pressure on stocks. The 10-year note
yield was up 5 basis points at 4.16% in recent trade.

An auction of 30-year bonds
didn’t elicit demand as strong as the 3-
and 10-year note auctions of the previous two days.

Read: Treasury auctions end on a downbeat this week after soft 30-year sale

Companies in focus

—Steve Goldstein contributed to this article

This story originally appeared on Marketwatch

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