How are stocks trading?

• The Dow Jones Industrial Average
  DJIA,
  -0.69%
  shed 158 points, or 0.5%, to 31,880.

• The S&P 500
  SPX,
  -1.30%
  fell 40 points, or 1%, to 3,959.

• The Nasdaq Composite
  COMP,
  -2.24%
  shed 232 points, or 1.9%, to 11,826.

On Thursday, the Dow climbed 162.06 points, or 0.5%, to 32,036.90, the S&P 500 gained 1% to 3,998.95 and the Nasdaq rose 1.4% to 12,059.61, marking a third straight session of gains.

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What’s driving markets?

Stocks turned lower Friday, after the S&P 500 index briefly broke above 4,000 for the first time since June 9, with shares of technology and communications companies weighing down Wall Street.

“Snap is really weighing hard on technologies, and the like,” said Kent Engelke, chief economic strategist at Capitol Securities, by phone.

While earnings expectations have been adjusting to inflation pressures, tighter financial conditions and growing recession fears, “If you miss expectations, you get crushed,” he said.

Read: It’s the end of ‘fantasyland’ for Big Tech and its workers

Disappointing results from Snapchat parent Snap Inc. and Twitter Inc.
TWTR,
+0.56%
weighed on the Nasdaq, while the S&P 500’s communications sector slumped 4.5% Friday.

That has earning next week in focus for some of the biggest tech names on Wall Street report, including Microsoft
MSFT,
-2.07%,
Meta, Apple
AAPL,
-1.08%
and Amazon
AMZN,
-2.52%,
along with Boeing
BA,
-1.96%,
McDonald’s
MCD,
-0.21%
and Caterpillar
CAT,
-1.52%.

Economic data also remains in the spotlight as more signs of slowing emerge, particularly with the Federal Reserve widely expected to raise its policy rate another 75 basis points next week as it battles high inflation.

See: The Fed could get lucky or things might go wrong. A guide to where the economy might go from here

The S&P Global Market Intelligence U.S. Purchasing Managers’ Index on Friday showed the biggest contraction in services and manufacturing activity since the start of the pandemic. This comes as more than two-thirds of the S&P 500 companies who have reported earnings have surpassed Wall Street’s expectations.

See: U.S. July flash PMI data show ‘worrying deterioration‘ in economy

“The preliminary PMI data for July point to a worrying deterioration in the economy,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “Excluding pandemic lockdown months, output is falling at a rate not seen since 2009.”

But from a purely technical perspective, stocks were likely due for a pullback on Friday anyway, said Kevin Dempter, a technical analyst at Renaissance Macro.

“You’ve had a 10% rally off the lows for the S&P, and a 15% for the Nasdaq. You’re getting to overbought levels, and you’re hitting some levels of resistance,” Dempter said.

The 10-year Treasury yield
TMUBMUSD10Y,
2.781%
fell 14 basis points to 2.77% from 2.908% in the previous session as investors weigh the odds of a U.S. recession.

Opinion: As Snap melts down, its founders make sure to protect the people who matter: themselves

What companies are in focus?

• Verizon Communications Inc. stock
  VZ,
  -7.71%
  tumbled7.6% after the telecommunications group cut full-year guidance and missed second-quarter earnings and revenue estimates.

• Schlumberger Ltd.
  SLB,
  +4.49%
  shares rose after the oilfield equipment and services group reported better-than-expected results and lifted its outlook.

• Seagate Technology Holdings PLC
  STX,
  -9.32%
  was down 9.4% after the data-storage device group’s results and outlook fell short of Wall Street expectations.

• Mattel Inc.
  MAT,
  -6.95%
  fell 6.6% after the toymaker reported a forecast-beating quarterly profit, but a 20% slump in sales of its American Girl business.

• HCA Healthcare Inc.
  HCA,
  +12.14%
  was the best performer on the S&P 500, rising more than 12% after a strong earnings report.

How are other assets trading?

• Oil futures swung between gains and losses, with U.S. crude
  CL.1,
  -0.85%

  CLU22,
  -0.85%
  recently rising 34 cents, or 0.4%, to $96 a barrel.

• Gold
  GC00,
  +0.82%

  GCQ22,
  +0.82%
  rose $13.30, or 0.8%, to $1,726 an ounce.

• Bitcoin
  BTCUSD,
  -0.52%
  turned 0.1% lower at $23,205.

• The Stoxx Europe 600 index
  SXXP,
  +0.31%
  rose 0.3%, booking a 2.9% weekly gain, its highest closing value in about six weeks, according to Dow Jones Market Data.

—Barbara Kollmeyer contributed to this article