U.S. stock indexes ended a choppy day of trading little changed Friday, though the S&P 500 finished with its first weekly loss in three weeks.
The benchmark index slipped 0.2%, extending its losing streak to a fourth day, after wavering between small gains and losses for most of the day. A majority of the companies in the S&P 500 rose, but losses in health care, communication services and other stocks outweighed gains by banks and industrial companies, among others.
The Dow Jones Industrial Average and Nasdaq composite closed essentially flat, while another strong showing by smaller companies pushed the Russell 200 index to a 2.2% gain.
This week's market pullback, the first downbeat week this month, comes as investors remain focused on the future of the COVID-stricken economy and the potential for more stimulus to fix it. They've also begun taking into account the likelihood of higher inflation as the economy continues to climb out of its pandemic-induced recession.
Expectations of higher inflation helped drive bond yields sharply higher this week. The yield on the 10-year Treasury note, which is used to set interest rates on mortgages and other consumer loans, rose to 1.34% Friday, though it's still low by historical standards.
"It's a gradual release of pent-up demand that we're beginning to acknowledge is happening through the U.S. economy," said Bill Northey, senior investment director at U.S. Bank Wealth Management. "And it's occurring against a backdrop of rising interest rates and inflation."
The S&P 500 fell 7.26 points to 3,906.71. The index hit an all-time high just a week ago. The Dow closed essentially unchanged, with a gain of 0.98 points, or less than 0.1%, at 31,494.32. The Nasdaq composite added 9.11 points, or 0.1%, to 13,874.46.
The Russell 2000 small-caps index climbed 48.30 points to 2,266.69. The rally in smaller companies is a sign that investors were anticipating more economic growth.
Wall Street continues to look to Washington for direction, as Democrats move forward with their $1.9 trillion stimulus plan to combat the coronavirus. Incremental moves were made this week, with the Biden administration signaling it would drop its call for a $15-an-hour minimum wage in this stimulus plan in order to get support from moderate Democratic senators.
The stimulus plan would include $1,400 checks to most Americans, additional payments for children, and billions of dollars in aid to state and local governments as well as additional aid to businesses impacted by the pandemic.
Much of the recent economic data has shown the U.S. economy could benefit from additional stimulus. Wall Street got a weekly jobless claims report Thursday that showed 861,000 Americans filed for unemployment last week, a rise from the previous week and higher than Wall Street had forecast. The Federal Reserve, in the minutes from its January meeting, also laid out the case for why additional stimulus would be necessary and not cause the economy to overheat.
Of particular note is investors' concerns about inflation. The yield of the 10-year note has risen 0.14 percentage points this week alone, a significant rise in such a short period of time. Rising bond yields can indicate that investors are hopeful for more economic growth in the future, but it can also signal potential inflation coming down the road.
In other economic news, sales of previously occupied U.S. homes rose again last month, a sign that the housing market's strong momentum from 2020 may be carrying over into this year.
Existing U.S. home sales rose 0.6% in January from the previous month to a seasonally-adjusted rate of 6.69 million annualized units, the National Association of Realtors said Friday. Sales rose 23.7% from a year earlier. It was the strongest sales pace since October. Homebuilder shares were broadly higher. Beazer Homes USA led the sector, climbing 4.3%.