Dow up, S&P 500 flat and Nasdaq heading for first back-to-back weekly loss of year

What’s driving markets

U.S. stock indexes slipped Friday, a trend that’s taken hold in mid-August as technology shares slump, longer-dated Treasury yields rise, and investors consider if corporate earnings can hold up through the rest of this year.

“I think it’s a confluence of things,” said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co., in a phone call Friday. “There’s a growing realization that we have no revenue growth,” and the many companies have been beating earnings estimates because of cost cutting, she said.

Cracks in commercial real-estate and recent jobs also don’t help, Sonders said, or Fitch Ratings downgrade of the U.S. or Moody’s Investors Service cutting its ratings on a string of regional banks.

Read: More challenges await U.S. banks but analysts think the worst may be over for the year

“On balance, earnings haven’t been as bad as feared, but they’ve hardly been inspiring,” said Josh Jamner, ClearBridge Investments, adding that a broad-based theme from second-quarter earnings reports has been one of margin pressure, as higher interest rates from the Federal Reserve and a rebound in commodity prices take hold.

“Margin pressure is likely to continue,” Jamner said Friday. “That’s not baked into stocks.”

Fears about the potential for inflation to creep back up in the next few months was on the radar Friday, after the U.S. producer-price index rose 0.3% in July. It followed Thursday’s promising report on consumer prices, which showed price growth was subdued at 0.2% for the second month in a row in July.

Read: Surprise rise in U.S. producer prices in July PPI was caused by jump in stock market

Friday’s PPI data, combined with a lackluster reading on consumer sentiment from the University of Michigan, helped rattle investors who have become too optimistic about the outlook for the U.S. economy and the Federal Reserve’s plans, said Gene Goldman, CIO of Cetera Investments.

Goldman pointed to volatility, including the S&P 500’s recent trend of surrendering weekly gains heading in the final stretch of trading, suggesting that investors are nervous about holding stock-market exposure over the weekend.

“The market has been ignoring all the bad news out there, they’ve been too optimistic about a soft landing,” Goldman said during a phone interview with MarketWatch. “The fact that stocks sold off again on Friday afternoon to me screams ‘uncertainty.’”

UMich sentiment data on Friday showed consumers’ outlook on the economy soured slightly since the beginning of August, while expectations for inflation over the next five years declined to 2.9% from 3%.

Rising Treasury yields also added to the pressure on stocks. The 10-year note
BX:TMUBMUSD10Y
yield was up 5 basis points at 4.16% in recent trade.

An auction of 30-year bonds
BX:TMUBMUSD30Y
didn’t elicit demand as strong as the 3-
BX:TMUBMUSD03Y
and 10-year note auctions of the previous two days.

Read: Treasury auctions end on a downbeat this week after soft 30-year sale

Schwab’s Sonders said a focus next week will be data on U.S. retail sales, housing data and initial jobless claims.

Companies in focus

• Snap Inc.
  SNAP,
  -1.47%
  shares were on track for a 9th straight day of declines on Friday.

• Tesla Inc.
  TSLA,
  -1.22%
  shares were down a day after a pair of exchange-traded funds managed by Cathie Wood’s ARK Investment
  ARKK

  ARKQ
  dumped more Tesla Inc. shares

• UBS
  UBSG,
  +4.72%

  UBS,
  +5.52%
  shares rose after the Swiss bank decided to sever the backstop the Swiss government gave to absorb Credit Suisse, a bet there are no hidden skeletons that will emerge that will hurt the bank in the way Countrywide’s acquisition dragged down Bank of America.

• The iShares MSCI China exchange-traded fund
  MCHI
  fell as shares of Chinese companies trading in the U.S. sank as property developer Country Garden Holdings Co.’s financial troubles cast a pall on the group. Shares of Alibaba Group Holding Ltd.
  BABA,
  -3.47%
  and Nio Inc.
  NIO,
  -2.05%
  fell on the news.

• Chipotle Mexican Grill Inc.
  CMG,
  +0.09%
  were lower and have fallen for nine straight trading days, following a brief rebound in the wake of the fast food company’s second-quarter earnings.

—Steve Goldstein contributed to this article