The S&P 500 stayed close to record highs Friday while the Dow Jones Industrial Average edged lower, as investors balanced weaker U.S. consumer data against easing fears of another Federal Reserve rate increase. Under the calm surface, however, high valuations, elevated Treasury yields and Middle East risks are giving investors reasons to stay alert.

At 10:05 a.m. ET on Aug. 14, the S&P 500 was up 0.11% at 7,807.65, while the Dow slipped 0.04% to 53,818.85. The Nasdaq Composite added 0.07% to 26,822.61. The S&P 500 entered Friday after closing at a record 7,798.99 on Thursday.

Why Are the S&P 500 and Dow Jones Mixed Today?

Friday's main economic surprise came from consumers. U.S. retail and food-service sales fell 0.6% in July to $763.6 billion, while economists had expected an increase. Sales were still 5% higher than a year earlier, but the monthly drop raised fresh questions about the strength of consumer spending.

Consumer confidence also weakened. The University of Michigan's preliminary sentiment index fell to 51.0 in August from 55.2 in July. Year-ahead inflation expectations rose slightly to 4.3%, while long-run expectations held at 3.3%.

For stocks, weaker growth data cuts both ways. It can signal pressure on corporate demand, but it can also give the Fed more room to leave interest rates unchanged. Cooler inflation readings earlier this week had already reduced concerns about a September rate increase.

S&P 500 Chart Raises a Liquidity-Valuation Warning

The S&P 500's climb to record territory has also revived debate about whether stock prices have moved too far, too quickly.

A chart shared by Rekt Fencer compares the S&P 500 with U.S. M2 money supply and shows the ratio returning to the zone associated with the dot-com-era peak. This is not a traditional valuation measure such as a price-to-earnings ratio, so it cannot by itself prove that stocks are historically overvalued.

Still, the chart makes a useful point: U.S. equities have risen sharply relative to broad money supply. With the S&P 500 near record highs, that could make the market more sensitive to an earnings disappointment, tighter liquidity or another jump in bond yields.

S&P 500 to M2 Ratio. Source: Rekt Fencer (@rektfencer) via X

Dow Jones Chart Keeps the Bullish Trend Alive

The Dow Jones is showing a different technical picture. A weekly TradingView chart shared by Andy Stop Loss keeps the index inside its broader rising structure despite Friday's modest pullback.

The Dow remains above its 10-week weighted moving average near 52,816, an important short-term trend level on the chart. The recent high around 54,744 is the main resistance area. A convincing breakout above that level would support another leg higher.

If the Dow loses the 10-week average on a weekly basis, however, momentum would begin to weaken. Deeper support appears around the 30-week average near 50,955, followed by the 50-week average around 49,996.

Dow Jones Weekly Uptrend. Source: Andy Stop Loss (@AndyStopLoss1), TradingView

What Should Stock Market Investors Watch Next?

Market breadth remained relatively healthy Friday morning, with advancing stocks outnumbering decliners on both the NYSE and Nasdaq. Energy stocks led the S&P 500 with a roughly 1.6% gain, while communication services benefited from strength in Meta Platforms and Alphabet. Reddit jumped nearly 15% after being selected to join the S&P 500, while Applied Materials fell about 4%.

The bigger test is whether the S&P 500 can hold above its latest record area while the Dow challenges 54,744. With the 10-year Treasury yield around the mid-4.6% area and Middle East tensions keeping oil and inflation risks in focus, investors have little room to ignore bad news. For now, the primary equity trend remains strong, but Friday's data and the supplied charts suggest the next move may require stronger confirmation rather than simple optimism.

Read the article at Coinpaper