The S&P 500 notched its third straight weekly gain Friday, even as the major U.S. stock indexes ended the day mostly lower.
A slide in technology stocks, along with losses in consumer-focused and real estate companies, offset solid gains elsewhere in the market, including big Wall Street banks and industrial stocks.
Bond yields rose sharply after the government reported that Americans kept spending money in August, particularly on cars.
An easing of tensions in the costly trade war between the U.S. and China bolstered the market this week, renewing hope among investors that a new round of negotiations slated to begin next month may yield some progress.
Investors are now looking ahead to next week, when the Federal Reserve is expected to announce another interest rate cut. The central bank lowered its benchmark interest rate in July by a quarter point, its first cut in a decade, in a bid to help maintain U.S. economic growth.
"When you have a run like we had, the market tends to pull back," said Quincy Krosby, chief market strategist at Prudential Financial. "Going into the Fed meeting next week, there may be a little bit of caution."
The S&P 500 index slipped 2.18 points, or 0.1%, to 3,007.39. With a gain of about 1% this week, the benchmark S&P 500 moved closer to its all-time high of 3,025.86 set on July 26.
The Dow Jones Industrial Average posted its eighth straight gain, rising 37.07 points, or 0.1%, to 27,219.52.
The technology heavy Nasdaq fell 17.75 points, or 0.2%, to 8,176.71. The Russell 2000 index of smaller-company stocks gained 3.07 points, or 0.2%, to 1,578.14.
Smaller-company stocks were the big winners for the week as the Russell 2000 climbed 4.9%. The smaller, U.S.-focused companies in the Russell are seen as more insulated from the volatile swings in the U.S.-China trade war.
Investors' renewed optimism on trade marks a stark contrast to the entire month of August, when both the U.S. and China made increasingly damaging retaliatory moves to escalate the dispute that has threatened to slow global economic growth and potentially prompt a recession.
"The palpable fear in the market during August has eased as the trade headlines have eased," Krosby said. "But we also saw stimulus from the European Central Bank. The market applauded that and expects the Fed to cut rates."
Central banks around the globe are trying to invigorate their economies at a time when growth is slowing. On Thursday, the ECB delivered a blast of monetary stimulus to try to rescue Europe's teetering economy in the face of sputtering growth and uncertainties caused by the U.S.-China trade conflict and Britain's expected exit from the European Union.
The U.S. economy looks far sturdier than Europe's, and the Fed's action is seen as a pre-emptive bid to help sustain a decade-long expansion.
Still, recent economic data has been mixed. On Friday, the Commerce Department's retail sales report beat economists' forecasts, but showed that consumers are becoming more cautious. The increase came from auto sales. Without those sales, spending was flat for the first time since February.
A steady rise in bond yields propelled bank stocks higher this week. The yield on the 10-year Treasury note is up more than 30 basis points from 1.55% late last week as investors grow more confident about economic growth amid easing trade war tensions. JPMorgan is up 6.8% and Bank of America gained 8.8% this week, far outpacing the broader market.
Bond yields rose sharply Friday following the retail sales report. The yield on the 10-year Treasury rose to 1.90% from 1.79% late Thursday.
That helped lift bank stocks, which rely on higher yields to set interest rates and make more money from loans. JPMorgan rose 2% and Citigroup rose 1.6%.
The decline in technology stocks marked a reversal from Thursday, when the sector led a broad market rally. Apple and Broadcom were the heaviest weights holding the sector down. Apple is among several big technology companies being asked for documents as part of a Congressional antitrust investigation. Apple slid 1.9%.
Chipmakers fell after Broadcom warned that demand remains weak and couldn't project when it will pick up again. Shares in Broadcom, which gets about 48% of its revenue from China, slid 3.4%.
Mining company Freeport-McMoRan climbed 3.8% as easing trade tensions between Washington and Beijing led to a 2.2% spike in copper prices.
Benchmark crude oil fell 24 cents to settle at $54.85 a barrel. Brent crude oil, the international standard, dropped 16 cents to $60.22 a barrel. Wholesale gasoline was unchanged at $1.55 per gallon. Heating oil declined 1 cent to $1.88 per gallon. Natural gas rose 4 cents to $2.61 per 1,000 cubic feet.
Gold fell $7.80 to $1,490.90 per ounce, silver fell 60 cents to $17.44 per ounce and copper rose 6 cents to $2.68 per pound.
The dollar fell to 108.13 Japanese yen from 108.14 yen on Thursday. The euro weakened to $1.1068 from $1.1073.
Major indexes in Europe moved broadly higher. Asian stocks finished with broad gains.