Stock futures were trading slightly lower Friday morning, pointing to a modest decline at the market opening as investors weigh recent signs of economic recovery and potential concern about inflation.
Investors get a new reading on consumer sentiment Friday morning. Growing consumer confidence is important to a recovery because their spending accounts for more than two-thirds of economic activity.
Overseas stock trading offered mixed signals, as European stocks were modestly lower at midday while Asian markets finished higher.
On Thursday, investors welcomed a better-than-expected report on jobless claims and data showing growth in retail sales. Strong results from a 30-year Treasury bond auction also supported the market, after weak Treasury sales earlier in the week stoked fears of rising interest rates and inflation.
Stocks closed modestly higher Thursday, an indication the market's three-month rally is slowing. The S&P has gained 39.7% and the Dow has jumped 34% since the market bottomed in early March.
Joe Clark, managing partner of Financial Enhancement Group, said the market is like a sponge. During the recent run-up in prices, investors absorbed all the good news they could take in to push stocks higher. Eventually the sponge becomes saturated and can't absorb any more information, he said.
"The sponge seems to be full," Clark said. He added that the same situation occurred with the absorption of bad news earlier in the year, leading to the market bottoming in early March.
The stock market showed little movement earlier in the week as investors are concerned that rising interest rates and weakening demand for government debt could derail a potential recovery in the economy. If Washington has to raise rates to attract buyers, that could hurt the economy by boosting borrowing costs for consumers.
A rally this week in commodity prices helped underpin stock prices, but some investors say much higher prices could hurt an economic recovery by increasing costs to consumers and businesses.
"Commodity prices coming off here will certainly impact the market, as it's been commodity prices that have basically helped push the market towards these new 12-month highs," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "So weakness there would be a potential problem."
Thursday's bond auction results also helped ease some of those concerns as demand for the debt appeared strong.
On Friday, bond prices were mostly higher. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.81% from 3.86% late Thursday. The yield on the three-month T-bill was flat at 0.17%.
The dollar rose against other major currencies, while gold prices fell.
Crude oil futures fell nearly 2% after a three-day rally lifted the price over $72 per barrel.
Overseas, Japan's Nikkei stock average rose 1.6%. Hong Kong's Hang Seng gained 0.5%. Asian markets were buoyed by reports that retail sales and industrial output grew strongly in China in May.
In afternoon trading, Britain's FTSE 100 fell 0.3%, Germany's DAX index declined 0.5%, and France's CAC-40 fell 0.3%.