Stocks ended a relatively quiet Friday session with modest losses, pulling back from yesterday's record-setting advance as weakness in mega-cap technology stocks and a midday rise in Treasury yields weighed on the major averages. The S&P 500 (-0.2%), Nasdaq Composite (-0.3%), and DJIA (-0.2%) finished lower, though the S&P 500 and Nasdaq Composite still notched modest gains for the week.

The major averages opened slightly higher before gradually slipping into negative territory as the morning progressed. The move coincided with a rise in longer-dated Treasury yields, with the 10-year note yield climbing six basis points to 4.70% despite a weaker-than-expected July retail sales report. The increase in yields provided a modest headwind following a week in which largely favorable CPI and PPI readings had eased concerns about additional Fed tightening.

Most of the pressure at the index level came from growth stocks. The Vanguard Mega Cap Growth ETF fell 0.5%, while the information technology sector (-0.4%) was among the laggards as some of yesterday's strongest areas gave back ground. The PHLX Semiconductor Index slipped 0.3%, with Applied Materials (AMAT 507.18, -27.36, -5.12%) facing some profit-taking following a solid earnings report and Broadcom (AVGO 392.99, -24.83, -5.94%) also among the large-cap chip laggards. Continued strength in memory stocks helped offset some of that weakness, as Sandisk (SNDK 1641.11, +113.00, +7.39%) extended its rally following yesterday's investor day after JPMorgan resumed coverage with an Overweight rating and a $2,250 price target.

Software stocks saw more pronounced profit-taking following yesterday afternoon's rally, leaving the iShares GS Software ETF (IGV) down 2.1%. Workday (WDAY 198.68, -7.77, -3.76%) also gave back some of yesterday's roughly 18% surge that followed reports that Silver Lake is in talks to acquire the company.

The consumer discretionary sector (-0.4%) also lagged amid weakness in mega-cap stocks and retail names ahead of a busy slate of earnings from the group next week.

Still, the broader market held up better than the major averages. Six S&P 500 sectors finished higher, and the S&P 500 Equal Weight Index ended flat, while the Russell 2000 (+0.5%) and S&P MidCap 400 (+0.3%) both advanced and reached fresh record highs during the session.

Energy (+1.4%) was the clear sector leader as crude oil resumed its climb despite little new geopolitical news. WTI crude settled $1.34 higher (+1.7%) at $82.40 per barrel, bringing its gain for the week to roughly 5%.

The utilities (+0.6%) and materials (+0.5%) sectors also outperformed, with higher precious metals prices supporting the latter.

Outside the current S&P 500 membership, Reddit (RDDT 177.97, +19.85, +12.55%) surged on news that the company will join the index next week.

Friday's subdued pullback ultimately looked more like consolidation following Thursday's record-setting advance than a meaningful shift in sentiment. The S&P 500 still finished the week higher after the July CPI and PPI reports helped ease concerns about additional Fed tightening, while the relative strength in the equal-weight index and smaller-cap stocks showed that Friday's weakness was concentrated largely in some of the market's biggest growth names.

U.S. Treasuries retreated on Friday, producing losses for the week in 10 and 30 year note yields while the front end also faced some pressure today, but the 2-year note still ended the week with a gain. The 2-year note yield settled up three basis points to 4.17% (-4 basis points this week), and the 10-year note yield settled up six basis points to 4.70% (+4 basis points this week). 

• Russell 2000: +23.6% YTD
• S&P Mid Cap 400: +18.8% YTD
• Nasdaq Composite: +15.0% YTD
• S&P 500: +13.7% YTD
• DJIA: +11.8% YTD

Reviewing today's data:

• July Retail Sales -0.6% (Briefing.com consensus 0.2%); Prior 0.2%, July Retail Sales, ex-auto -0.3% (Briefing.com consensus 0.2%); Prior -0.2%
  
  • The key takeaway from the report is that control retail sales dropped 0.4% month-over-month. This figure will feed into GDP forecasts, so there are apt to be some downward revisions to Q3 GDP forecasts.
• June Business Inventories 0.0% (Briefing.com consensus 0.1%); Prior was revised to 0.4% from 0.3%
• August Univ. of Michigan Consumer Sentiment - Prelim 51.0 (Briefing.com consensus 54.5); Prior 55.2
  
  • The key takeaway from the report is that only 8% of all consumers surveyed expect their income growth to exceed inflation in the year ahead. That expectation could ultimately translate into lower discretionary spending activity.