By Joe Wallace and Gunjan Banerji
The S&P 500 ticked lower Friday, remaining on track to finish the week with declines, snapping a three-week winning streak.
The broad stock market index slipped 0.4% in afternoon trading and is poised for a weekly decline of about 1%. The Dow Jones Industrial Average was down 0.6%, or 178 points. The Nasdaq Composite shed about 0.5%. Both indexes are set for weekly losses as well.
Money managers say stocks are likely to lack clear direction in the coming weeks as investors avoid placing big bets ahead of the Nov. 3 election. They are looking instead to a flurry of economic and corporate-earnings reports for a clearer picture of the economic outlook, as rising coronavirus cases threaten to slow the recovery.
"It's so hard to take this information from the election and translate it into anything concrete," said Matt Rowe, managing partner at Headwaters Volatility. "We just don't know."
White House officials and Democratic leaders are continuing negotiations over a nearly $2 trillion coronavirus-relief package, which many investors view as crucial to maintaining the economic recovery. Reported coronavirus cases in the U.S. have risen to their highest level since July. And earnings season is in full swing, with the technology companies that have powered the stock market higher due to report next week.
Investors are increasingly optimistic that a second dose of stimulus will be delivered, even if many think the odds of a deal before the election are slim. Stocks in sectors that are sensitive to the outlook for the economy, including energy and banks, have outperformed this week. Information-technology stocks have faltered.
"The message from markets is that fiscal stimulus is coming and it should have a positive impact on U.S. growth," said Paul O'Connor, head of multiasset at Janus Henderson Investors. Janus has booked profits from tech stocks and bought shares of regional U.S. banks, which stand to benefit from a strengthening economy, he said.
In another sign that investors expect quicker growth and inflation, the bond market's yield curve has steepened. The yield on 10-year Treasury notes rose to 0.868% Friday, from 0.847% Thursday, putting it on track to climb for a seventh consecutive trading day. Yields on two-year notes haven't risen as fast, to 0.157% Friday from 0.143% at the end of last week.
On Friday, fresh data showed that overall business activity in the U.S. quickened its expansion pace. The flash reading for the U.S. Composite Output Index came in at 55.5 in October, up from the 54.3 registered in September. That's the fastest increase in private sector business activity since February 2019.
In Europe, the economic outlook is gloomier amid a large second wave of coronavirus infections that has prompted governments to restrict travel and leisure. Data firm IHS Markit said Friday its composite purchasing managers index for the eurozone fell to 49.4 in October, indicating a decline in manufacturing and services activity.
Investors were also parsing the latest batch of quarterly earnings. Shares of American Express fell 2.3% after third-quarter profits missed expectations. Intel shares dropped more than 10% after quarterly revenue and earnings fell, a sign the chip giant may be seeing an end to the work-from-home boost. Capital One Financial's profit and revenue rose in the recent quarter, lifting shares 3.4%.
More than a quarter of companies on the S&P 500 had reported through Thursday, and 83% of them had beaten analysts' forecasts for earnings-per-share, according to FactSet.
Shares of Gilead Sciences jumped 1.9% after the Food and Drug Administration gave final full approval to the company's remdesivir drug, which has been widely used to treat hospitalized Covid-19 patients since May.
Asian markets were mixed, with the Shanghai Composite Index closing 1% lower and Japan's Nikkei 225 eking out a 0.2% gain.
Write to Joe Wallace at Joe.Wallace@wsj.com and Gunjan Banerji at Gunjan.Banerji@wsj.com
(END) Dow Jones Newswires