US stocks on Friday pulled further back from their records to cap the weakest week for the S&P 500 since May.
Indices sloshed between small gains and losses for much of the day before turning lower in the afternoon after Iran said that it had seized a British oil tanker, the latest escalation of tensions between Tehran and the West.
Reined-in expectations for how deeply the US Federal Reserve will cut interest rates at its next meeting also weighed on stocks.
The S&P 500 on Friday fell 18.50 points, or 0.6 percent, to 2,976.61. After setting its record high on Monday, the index see-sawed mostly lower and lost 1.2 percent from a close of 3,013.77 on July 12. It was just the second down week for the index in the past seven.
The Dow Jones Industrial Average on Friday fell 68.77, or 0.3 percent, to 27,154.20, falling 0.7 percent from 27,332.03 a week earlier.
The NASDAQ Composite on Friday lost 60.75, or 0.7 percent, to 8,146.49, dropping 1.2 percent from a close of 8,244.14 on July 12.
The Russell 2000 index of smaller stocks on Friday fell 7.73 points, or 0.5 percent, to 1,547.90, a decrease of 1.4 percent from 1,570.00 a week earlier.
Momentum for stocks has slowed since early last month, when they began soaring on expectations that the Federal Reserve would cut interest rates for the first time in a decade to ensure the US economy does not succumb to weaknesses abroad.
The Fed’s next meeting is scheduled for the end of this month.
Late on Thursday, US Treasury yields sank after comments by Fed officials raised expectations that it might cut rates by half a percentage point, rather than the typical quarter point.
However, yields climbed on Friday as the market grew more convinced that the Fed would cut just 0.25 percentage points on July 31.
“It could be 25 wasted,” Northwestern Mutual Wealth Management Co chief investment strategist Brent Schutte said, adding that a half-point cut would be more effective.
“I think it’s more important to shock the market a bit and convince the market they’re serious about pushing inflation above 2 percent,” he said.
The yield on the 10-year Treasury rose to 2.05 percent, from 2.04 percent late on Thursday. The two-year yield, which is more influenced by expectations of Fed moves on rates, climbed from 1.77 percent to 1.81 percent.
Until the Fed’s meeting, investors are focusing on whether companies can top the meager expectations Wall Street has for the profits they made during the spring.
Microsoft Corp jumped in morning trading after reporting stronger earnings for April through June than analysts expected, although it faded as the afternoon progressed and ended the day with just a 0.1 percent gain.
Several banks climbed after reporting stronger-than-expected earnings, but financial stocks in the S&P 500 were down overall. That was partly because of a 2.8 percent drop for American Express Co, which reported stronger earnings for the latest quarter than analysts forecast, but did not raise its forecast for full-year earnings.
“The biggest overall trend is if you beat, you may be mildly rewarded, and if you miss, you are going to get pounded,” TD Ameritrade Holding Corp chief market strategist J.J. Kinahan said.
Energy stocks had the biggest gains in the S&P 500 after the price of oil climbed on worries about possible supply disruptions.
British Secretary of State for Foreign and Commonwealth Affairs Jeremy Hunt said that Iranian authorities seized two vessels in the Strait of Hormuz, one British-flagged and the other under Liberia’s flag.
The move came two days after the US said that it downed an Iranian drone in the strait, which is a key waterway for moving oil.
Boeing had one of the biggest gains in the S&P 500, even though it said that it would take a US$4.9 billion charge to cover possible compensation it would pay airlines following the grounding of its 737 MAX jet.
That is a huge number, analysts conceded, but it might provide some certainty to investors who had worried that the payments could be much higher.
Boeing also said that the figure assumes that its 737 MAX jetliners return to service later this year, which would be earlier than some investors had thought.
Boeing shares rose 4.5 percent and helped drive industrial stocks to one of the biggest gains of the 11 sectors that make up the S&P 500, at 0.5 percent.
Additional reporting by staff writer
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