The S&P 500 (+0.01%) closed fractionally higher on Friday, successfully digging itself out of bear market territory from earlier in the session, which is typically defined as a 20% decline from a recent high. The Dow Jones Industrial Average (+0.03%), Nasdaq Composite (-0.3%), and Russell 2000 (-0.2%) also closed on a better note. 

Early on, risk sentiment was pressured by a failed rebound effort (the S&P 500 was down 3.4% from its intraday high to its intraday low), and by growth concerns stemming from persistent inflation and supply chain issues. The early gains were largely sentiment-driven amid a belief that the market was overdue for a bounce and news that the People's Bank of China cut its 5-year prime loan rate by 15 basis points to 4.45%.

All 11 S&P 500 sectors were trading lower, but a nice rebound transpired in the last hour of action with no specific news to account for the rally. Six of the 11 S&P 500 sectors closed in positive territory, including health care (+1.3%) and real estate (+1.2%) with gains over 1.0%.

The S&P 500 consumer discretionary sector (-1.5%), however, succumbed to continued weakness in retail stocks after Ross Stores (ROST 71.87, -20.83, -22.5%) provided disappointing earnings results and guidance. Ross was the latest retailer to highlight rising cost pressures, raising concerns about slower earnings growth and the durability of the consumer in this high-cost environment.

Shares of Ross dropped 22.5%, versus a 2.2% decline for the SPDR S&P Retail ETF (XRT 61.33, -1.36, -2.2%). 

Deere (DE 313.31, -51.31, -14.1%) and Applied Materials (AMAT 106.46, -4.28, -3.9%), two other cyclical companies, also struggled after highlighting supply chain issues in their earnings reports. Deere missed revenue estimates and weighed heavily on the industrials sector (-1.1%) while Applied Materials missed earnings expectations and issued downside quarterly guidance. 

Some curve-flattening activity in the Treasury market and lower copper prices ($4.27/lb, -0.02, -0.5%) corroborated the underlying growth concerns. The 2-yr yield fell three basis points to 2.58%, and the 10-yr yield fell seven basis points to 2.79%. The U.S. Dollar Index increased 0.3% to 103.10. WTI crude futures settled above $110.00 per barrel ($110.05, +0.14, +0.1%). 

Investors did not receive any economic data on Friday. Looking ahead, investors will receive New Home Sales for April and the preliminary IHS Markit Manufacturing and Services PMIs for May on Tuesday. 

• Dow Jones Industrial Average -14.0% YTD
• S&P 500 -18.1% YTD
• Russell 2000 -21.0% YTD
• Nasdaq Composite -27.4% YTD