Dow falls nearly 100 points as inflation fears overshadow strong earnings

U.S. stock indexes gave up their gains on Friday as a worse-than-expected consumer sentiment reading overshadowed strong retail sales numbers and earnings reports.

The Dow lost about 95 points, or 0.27%, after opening above the 35,000 level. The S&P 500 dipped around 0.2% and the Nasdaq Composite traded near the flatline.

The S&P 500 and Nasdaq Composite are on track to close the week in the red, down roughly 0.3% and 1.2%, respectively. The Dow is little changed on the week.

The U.S. consumer sentiment index from the University of Michigan came in at 80.8 for the first half of July, down from 85.5 last month and worse than economists estimated, who projected an increase.

The survey released Friday showed inflation expectations rising with consumers believing prices will increase 4.8% in the next year, the highest level since August 2008.

“That weakness is at face value hard to square with the acceleration in employment growth and the continued resilience of the stock market,” said Andrew Hunter, senior U.S. economist at Capital Economics, but the report “suggested that concerns over surging inflation are now outweighing those positive trends.”

The latest inflation numbers released earlier this week showed the consumer price index rose 5.4% in June from a year ago, the fastest pace in nearly 13 years.

Inflation fears appeared to overshadow a strong retail sales report released Friday and signals of improving employment. Retail and food service sales rose 0.6% in June, while economists surveyed by Dow Jones had expected a 0.4% decline. Initial jobless claims numbers released Thursday totaled 360,000 for the week ending July 10, its lowest level since March 14, 2020.

Weaker performance from technology stocks also weighed on the market. Shares of Netflix fell ahead of the streaming giant’s second-quarter earnings report next week. Nvidia shares also dropped.

Investors digested strong earnings results from the first major week of second-quarter reports. Though some of the nation’s largest companies posted healthy earnings and revenues amid the economic recovery, the reaction in the stock market has so far been muted.

The Financial Select Sector SPDR Fund is down about 0.8% this week despite big profit growth numbers posted by the likes of JPMorgan Chase and Bank of America.

For 18 S&P 500 companies that beat analyst estimates for second-quarter earnings this week, the average earnings-per-share result was 18% higher than expected. But those companies saw their shares fall 0.58% on average after reporting.

Much of the market’s upward pressure over the last week has come from a handful of mega-cap internet and communications stocks. Apple, Netflix, Google-parent Alphabet and Microsoft are all up this week.

— CNBC’s Michael Bloom contributed reporting.