S&P 500 snaps 4-day win streak, but stocks still score weekly gains after bank earnings

By Christine Idzelis and Joseph Adinolfi

Dow scores fifth straight day of gains

U.S. stocks ended mostly lower Friday, with the S&P 500 index snapping four straight days of gains, as investors weighed bank earnings and a University of Michigan survey of consumer sentiment, but the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all notched weekly gains.

How stock indexes traded

For the week, the Dow rose 2.3%, the S&P 500 gained 2.4% and the technology-heavy Nasdaq jumped 3.3%. The Dow and Nasdaq each saw their biggest weekly percentage gains since March, while the S&P 500 booked its largest weekly rise since mid-June, according to Dow Jones Market Data.

What drove markets

U.S. stocks ended mostly down even though Wall Street banks reported good earnings for the second quarter and after a fresh sign that consumers have become more upbeat.

The University of Michigan's survey of consumer sentiment, released Friday, showed Americans' confidence in the economy has recently risen.

See:U.S. consumer sentiment soars in July to highest level since September 2021

"At the end of the day, if people have jobs and feel secure in their jobs, they're going to spend money," said Yung-Yu Ma, chief investment officer at BMO Wealth Management, in a phone interview Friday. "There's only so much of a pullback that can happen if the job market doesn't crack."

Meanwhile, the stock market is still benefiting from the residual effects from Wednesday's consumer-price-index report for June, said Ma, as it indicated that "inflation is coming down pretty broadly." Still, the University of Michigan's gauge of consumers' inflation expectations ticked higher to 3.4% in July, from 3.3% in the prior month, which caught the market's attention.

"While the confidence number moved up markedly, I think that the inflation expectations piece of the puzzle didn't move down as much as we thought it would," said Art Hogan, chief market strategist at B.Riley Wealth.

Some of the largest U.S. banks, along with asset-management giant BlackRock Inc. (BLK), released on Friday their results for the quarter ended in June, as earnings season gets underway.

JPMorgan Chase & Co.(JPM), Wells Fargo & Co.(WFC) and Citigroup Inc. (C) all reported earnings and revenue that beat forecasts. Investors had been eager to hear from those financial giants after a quarter marked by bank failures and interest-rate hikes by the Federal Reserve.

"JPMorgan is a big bellweather," said Ma. "Seeing bank profits hold up is an important sign this earnings season."

Investors also cheered numbers from Dow component UnitedHealth Group Inc. (UNH), which emerged as the best-performer on the Dow as it roared higher.

"We've had a week where most of our news flow and inputs have come in better than expected, whether you look at CPI, PPI or the first earnings from Delta and Pepsi," Hogan said during a phone interview with MarketWatch.

The S&P 500 on Thursday broke above the 4,500 level for the first time since April 2022. The index finished Friday still above that mark, booking a solid gain for the week, but gave up the rally seen earlier in the trading session.

"We need probably more time now to digest these gains," said Keith Lerner, co-chief investment officer at Truist Advisory Services, by phone Friday. Investors may have "a little bit of apprehension after what's been a really strong period for the market," he said, and there may be a little bit of profit taking "underneath the surface."

Investors on Friday also digested a report on import prices, which showed that prices fell again in June, dropping 0.2%. Import prices have fallen every month of 2023 except for April -- another sign that price pressures in the U.S. have abated.

See:U.S. import prices fall in June, fifth drop in past six months

But investors were also considering remarks from Federal Reserve Board Gov. Christopher Waller, who said Thursday he was not swayed by June's benign consumer inflation data, and that he wants the central bank to go ahead with two more 25-basis-point rate hikes this year.

In Lerner's view, the Fed's last interest-rate increase may be in July. He cited "disinflationary trends" and a U.S. economy that will probably slow in the second half of this year due to lag effects of the central bank's past rate hikes.

-Christine Idzelis

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07-14-23 1644ET

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