Investing.com -- The S&P 500 closed just shy of record Friday as data pointing to weakness in the consumer and ongoing inflation concerns weighed upside momentum.
At 4:00 p.m. ET (21:00 GMT), the Dow Jones Industrial Average dropped 166 points, or 0.4%, while the S&P 500 fell 0.1% to close at 6,111.75, just shy of its all time high of 6118.71. The NASDAQ Composite was roughly flat.
Retail sales slips in January flagging concerns about consumer strength
U.S. retail sales contracted by more than anticipated in January, as a cold weather snap and natural disasters hit spending activity that has been largely bolstered by a resilient labor market.
Retail sales fell by 0.9% last month after an upwardly-revised increase of 0.7% in December. Economists had predicted a dip of 0.2% in retail sales, which mostly include goods and are not adjusted for inflation, after a previously reported 0.4 rise in December.
Year-on-year, retail sales advanced by 4.2%.
The data comes after a spell of cold weather rampaged through much of the country last month, while devastating wildfires in Los Angeles may also have weighed on spending.
"Following this morning’s decline in retail spending, with control group sales which feed directly into the GDP calculation off 0.8%, GDP for the first quarter is likely to be revised lower, potentially below 2% for the first time since Q1 2024," Stifel said in a note.
Inflation gauges, both consumer and producer prices, have come in hotter than expected this week, but the PPI data showed some softness in components of inflation that factor into PCE price index data - the Federal Reserve’s preferred inflation reading. This could herald a slightly softer PCE print for January.
Easing PCE inflation could give the central bank more headroom to cut interest rates further, although Fed Chair Jerome Powell warned this week that the central bank was likely to remain cautious about further easing.
Trump outlines roadmap for reciprocal tariffs
President Trump on Thursday signed an executive order outlining plans to impose trade tariffs that would match or surpass those imposed by major trading partners on U.S. imports, in the latest escalation of his drive to overhaul America's trading relationship with its friends and adversaries alike.
However, Trump did not immediately impose the new tariffs, choosing instead to conduct potentially weeks of investigations into America's trading ties with a host of countries, including traditional allies like the European Union, South Korea, and Japan.
This delay has been welcomed by investors as it provides time for negotiations, even though the tariffs could still be applied sometime this year.
The president had earlier this week imposed 25% duties on steel and aluminum imports.
Ukraine negotiations in Munich
Sentiment has also been boosted this week by raised expectations that the war between Ukraine and Russia could be ended in the near future.
In the spotlight Friday will be the Munich Security Conference, with the major western powers getting together to discuss the future of Ukraine and peace talks with Russia.
The summit comes just days after President Trump announced that Russia and Ukraine had agreed to start peace talks, with the summit likely to discuss what conditions and compromises Moscow and Kyiv are likely to demand as part of those negotiations.
Moderna disappoints with Q4
Moderna (NASDAQ:MRNA) rose 3% despite the biotech reporting a wider loss in fourth-quarter, as it continues to slash costs and see lower demand for its Covid vaccine.
GameStop (NYSE:GME) stock rose 2.5% after CNBC reported that the video game retailer is mulling over potential investments into Bitcoin and other cryptocurrencies, as well as other alternative asset classes.
Airbnb (NASDAQ:ABNB) stock soared more than 14% after the short-term housing rental company reported fourth quarter earnings and sales ahead of expectations, helped by a “notable acceleration” in the number of first-time bookers on the platform.
Roku (NASDAQ:ROKU) stock added 14% after the technology company forecast annual revenue above expectations signaling strong advertising sales as more customers switch to streaming platforms.
(Peter Nurse, Ambar Warrick contributed to this article.)