Stocks Finish Mixed as Investors Struggle with Valuation Concerns, Rising Rates and Economic Data

U.S. economic data came into play on Friday with the release of reports on U.S. employment costs, GDP and consumer sentiment. Earnings continued to be a hot topic for stock investors. Profit-taking and position-squaring also came into play.

U.S. Economic Data

According to a report by the government released on Friday, U.S. private-sector workers received the biggest pay raise in 11 years in the first three months of the year, a sign that the tight job market is slowly lifting wages.

The Labor Department reported that its employment cost index shows wages and salaries in the private sector rose 1 percent between January and March compared with the previous quarter. This represented the biggest gain since the first quarter of 2007.

The employment cost index measures health care and other benefits as well as pay. Overall compensation for U.S. workers rose 2.7 percent in the first quarter from a year earlier. That is also the fastest gain since the third quarter of 2008.

First quarter GDP showed the economy slowed during the first three months of the year. The weakness was blamed on a slowdown in consumer spending, which grew at its weakest pace in nearly five years. According to the Commerce Department, gross domestic product increased at a 2.3 percent annual rate. Traders had priced in a reading of 2.0%. The first estimate of GDP came in at 2.9%.

A report from the University of Michigan on consumer sentiment came in better-than-expected in April, mostly on favorable views of their finances by Americans. The sentiment index came in at 98.8, slightly below the 98.0 estimate, but down from the 101.4 reading in March. The preliminary reading released earlier this month came in at 97.8.

“Aside from the impact of Trump’s tax and tariff policies, the best simple summary of the current state of consumer confidence is that the economy is ‘as good as it gets’,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.

U.S. Stock Market

The major U.S. stock index finished mixed on Friday with the benchmark S&P 500 Index and tech-driven NASDAQ Composite posting small gains, and the blue chip Dow coming in lower for the session.

The NASDAQ Composite traded higher early in the session on the back of strong earnings from Amazon that were released after Thursday’s session. The results were strong enough to drive the stock to a record high.

Despite the strong performance in Amazon and other technical stocks, the rally couldn’t sustain its upside momentum. The S&P 500 Index and Dow never got on track and traded mostly sideways during the session. Investors may have been tentative about buying at current price levels due to concerns over valuation and rising U.S. interest rates. Investors may have also spent the day digesting the reports on GDP, employment costs and consumer confidence.