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By Stephen Culp
NEW YORK (Reuters) - U.S. stocks closed mostly lower on Friday, losing momentum as investors digested a hectic week of mixed earnings, and economic data that seemed to support the "higher for longer" interest rate scenario.
The Nasdaq advanced, with tech and tech-adjacent momentum stocks led by Amazon.com, Apple and Meta Platforms providing much of the heavy lifting, while the S&P 500 and the Dow Jones Industrial Average lost ground.
All three indexes notched weekly losses steeper than 2%.
The benchmark S&P 500 closed 10.28% below its July 31 closing high.
"It's hard to fight the trend in the market, and the trend has been lower," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. "Earnings have been fine but they're not providing the kind of catalyst to spark a reversal to the upside."
The Commerce Department's hotly anticipated Personal Consumption Expenditures (PCE) report showed inflation gradually cooling down as expected, getting closer to the Federal Reserve's 2% annual target while consumer spending, which accounts for about 70% of the U.S. economy, posted a robust upside surprise.
"The economy would be just fine with inflation around 3%," Mayfield added. "It's that last mile of getting where we are today to the Fed target. It just depends how aggressively (the Fed) want(s) to pursue a hard 2%. That's the big question."
The data did little to move the needle regarding market expectations that the Fed will leave its key interest rate unchanged at its November policy meeting.
Market participants are nearing the end of a busy earnings week, during which nearly one-third of the companies in the S&P 500 posted third-quarter results.
As of Friday, the reporting season had essentially reached the halfway point, with 245 of the companies in the S&P 500 having reported. Of those, 78% have delivered consensus-beating earnings.
Analysts now expect aggregate annual S&P earnings growth of 4.3%, a sharp improvement over the 1.6% growth seen at the beginning of the month.
"Big tech earnings were priced for perfection, and they were mostly just 'good.' That was not enough," Mayfield said. "But the broader picture is good. This could be the building blocks for a rally to year end."
Amazon.com jumped 6.8% after the e-commerce giant reported its cloud business growth is stabilizing and predicted a revenue increase over the holiday season.
Intel surged 9.3% following the chipmaker's consensus-beating quarterly report, lifting the whole sector.