Wall Street rally pauses as investors await corporate earnings reports

(Reuters) – A five-day rally in U.S. stocks ran out of steam on Friday as investors booked profits and reset their positions ahead of the earning season set to begin next week.

The technology and trade-sensitive stocks, which led the rally, took a beating and dragged the S&P 500 and the Nasdaq lower. Microsoft Corp (MSFT.O) fell 1.1 percent and Amazon.com Inc (AMZN.O) dropped 0.3 percent.

At the end of a solid week that lifted the S&P 500 .SPX by 10 percent from its 20-month lows hit around Christmas, all the 11 major S&P sectors were trading lower.

“We’ve run up and people seem to be in a wait-and-watch mode before they put more money back in,” said Mark Grant, chief global strategist at B. Riley FBR Inc in Fort Lauderbale, Florida.

Big banks will kick off the fourth-quarter earnings next week and investors will keenly look for signs of a slowdown in economic growth, a concern that led to a selloff in stocks in the final quarter of 2018.

S&P 500 companies, on average, are seen posting 14.5 percent growth in profit as they report December-quarter results, according to IBES data from Refinitiv.

However, expectations for growth in 2019 are at 6.4 percent, down from 7.3 percent on Jan. 1.

General Motors (GM.N) shares surged 8.3 percent after the No.1 U.S. automaker said it expects 2018 earnings per share to exceed its prior estimates and forecast upbeat profit for 2019. Shares of Ford Inc (F.N) also rose 1.6 percent.

This stands in sharp contrast to recent sales warnings from Apple Inc (AAPL.O) and Macy’s Inc (M.N) due to weakness in the crucial holiday-quarter.

Data showed U.S. consumer prices fell for the first time in nine months in December amid a plunge in gasoline prices, but underlying inflation pressures remained firm as rental housing and healthcare costs rose steadily.

Stocks got a little boost on Thursday after Fed chair Jerome Powell reiterated the central bank can be patient in approving any further rate hikes as officials gauge if the U.S. economy will slow this year.

At 10:02 a.m. EDT the Dow Jones Industrial Average .DJI was down 142.12 points, or 0.59 percent, at 23,859.80, the S&P 500 .SPX was down 13.00 points, or 0.50 percent, at 2,583.64 and the Nasdaq Composite .IXIC was down 32.37 points, or 0.46 percent, at 6,953.70.

Activision Blizzard Inc (ATVI.O) fell 11.8 percent, leading the decliners on the S&P 500, after the video game publisher transferred full publishing rights for its “Destiny” game franchise to video game developer Bungie.

A retreat in oil prices weighed on energy companies, with the S&P energy index .SPNY slipping 1 percent.

The S&P industrial index .SPLRCI fell 0.75 percent, with Caterpillar (CAT.N) dropping 1.0 percent after Goldman Sachs cut earnings forecast for 2018-2020.

Netflix Inc’s (NFLX.O) shares, which have leapt more than 20 percent this year, were up 3.3 percent, with Credit Suisse raising quarterly subscriber additions estimates ahead of its earnings next week.

Declining issues outnumbered advancers for a 2.19-to-1 ratio on the NYSE and for a 1.78-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and no new lows, while the Nasdaq recorded 6 new highs and 7 new lows.