Stocks end lower as Dow, S&P 500 and Nasdaq snap five straight weeks of gains

What drove markets

U.S. stocks closed lower Friday, with the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all snapping five straight weeks of gains.

The market’s stability despite this week’s “nerve-racking inflation data” and “hawkish” commentary from Federal Reserve officials  is “remarkable,” said Mark Hackett, Nationwide’s chief of investment research, by phone Friday. “At some point, we’re going to get a reminder that it’s not this easy.”

The S&P 500 remains up 4.9% so far this year despite slipping Friday.

The stock market appears resilient in the face of hotter-than-anticipated inflation readings this week because of “continued strong earnings” as companies roll out their fourth-quarter results, said David Waddell, chief executive and chief investment strategist at Waddell & Associates, in a phone interview Friday. Fourth-quarter earnings have come in “a lot better than expected,” he said.

And although U.S. inflation in January, as measured by the consumer-price index and producer-price index, was stronger than Wall Street expected, Waddell noted that “the trend is lower.”

Data from the producer-price index showed wholesale prices rose 0.3% last month, according to a report Friday from the Bureau of Labor Statistics. That was the biggest increase in five months and surpassed economists’ expectations for a 0.1% uptick.

Core wholesale prices, which exclude food, energy and trade margins, saw an even bigger rise in January, climbing 0.6% for the largest monthly jump in a year.

Stocks stumbled Friday as Treasury yields rose on the PPI inflation report. The rate on the 10-year Treasury note
BX:TMUBMUSD10Y
increased more than 5 basis points to 4.294%, according to Dow Jones Market Data.

Read: Fed’s Daly says patience is needed to finish the job on inflation

In other economic news, investors digested fresh data on housing starts, which showed the construction of new homes fell 14.8% in January as home builders scaled back new projects.

Also, a gauge of preliminary consumer sentiment from the University of Michigan for February ticked higher to 79.6 from 79 last month.

Strong earnings reports helped boost certain stocks on Friday, with shares of Applied Materials Inc.
AMAT,
+4.28%
jumping more than 6% after the chip-equipment company delivered upbeat results and guidance after Thursday’s close.

Chip maker Nvidia Corp.
NVDA,
+4.00%,
which is in the “Magnificent Seven” group of megacap stocks, will report its quarterly earnings next week on Feb. 21. The company’s shares ended 0.1% lower Friday as the S&P 500’s tech sector broadly fell.

With 79% of companies in the S&P 500 having released fourth-quarter earnings so far, 75% of them have reported a “positive” surprise in their earnings per share, according to a note Friday from FactSet’s senior earnings analyst John Butters. That’s “below the 5-year average of 77% but above the 10-year average of 74%.”

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Companies in focus

• Shares of Super Micro Computer Inc.
  SMCI,
  +4.54%
  tumbled 20%, as the largest component of the small-cap Russell 2000 helped drag the index lower. The stock remains up more than 182% year to date.
• Nike Inc.
  NKE,
  -1.62%
  shares declined 2.4% after the company announced 1,700 job cuts as part of a plan to cut costs.
• DraftKings Inc.
  DKNG,
  +0.48%
  shares rose around 0.3% after the company surprised Wall Street with a quarterly loss and revenue that was merely in line with expectations.

Barbara Kollmeyer contributed to this article.