Dow falls 100 points as inflation fears overshadow strong earnings

U.S. stock indexes gave up their gains on Friday as a worse-than-expected consumer sentiment reading overshadowed strong retail sales numbers and earnings reports.

The Dow lost about 100 points, or 0.29%, after opening above the 35,000 level. The S&P 500 dipped around 0.15% and the Nasdaq Composite traded near the flatline. The S&P 500 and Nasdaq Composite are on track to close the week lower.

The U.S. consumer sentiment index from the University of Michigan came in at 80.8 for the first half of July, down from 85.5 last month and worse than economists expected, who expected an increase.

The survey released Friday showed inflation expectations rising with consumers believing prices will increase 4.8% in the next year, the highest level since August 2008.

The consumer sentiment reading came after the Labor Department reported Tuesday that the consumer price index rose 5.4% in June from a year ago, the fastest pace in nearly 13 years.

Meanwhile, retail and food service sales rose 0.6% in June, while economists surveyed by Dow Jones had expected a 0.4% decline. Excluding autos, those sales jumped 1.3%, beating economists’ estimate of a 0.4% gain.

Weaker performance from technology stocks also weighed on the market. Shares of Netflix fell ahead of the streaming giant’s second-quarter earnings report next week. Nvidia shares also dropped.

Investors also digested strong earnings results from the first major week of second-quarter reports. Though some of the nation’s largest companies posted healthy profits and revenues amid the economic recovery, the reaction in the stock market has so far been muted.

Morgan Stanley’s second-quarter earnings report, for example, topped analysts’ expectations Thursday, yet its shares closed just 0.18% higher.

For 18 S&P 500 companies that beat analyst estimates for second-quarter earnings this week, the average earnings-per-share result was 18% higher than expected. But those companies saw their shares fall 0.58% on average after reporting.

The soft moves in reaction to corporate earnings have contributed to a lackluster week for the S&P 500, which dipped 0.2% on the week as of Thursday’s close. However, the broad index is up about 16% this year.

Much of the market’s upward pressure over the last week has come from a handful of mega-cap internet and communications stocks. Apple, Netflix, Google-parent Alphabet and Microsoft are all up this week.

— CNBC’s Yun Li contributed reporting.