Stocks fell on Friday as traders digested a slew of earnings results and a new report on consumer spending that came in stronger-than-expected for June. A print on consumer sentiment far disappointed, however, and pointed to increased consumer concerns around inflation.

The S&P 500, Dow and Nasdaq each erased earlier gains to turn negative.

This week, investors have taken in a bevy of new economic data alongside an early batch of second-quarter earnings results. On the economic side, data has been mixed, with core consumer and producer price increases rising by the most in decades as supply chain constraints and labor shortages weigh. Friday's report on retail sales from the Commerce Department, however, showed a surprise pick-up in the demand side of the economy. U.S. retail sales gained 0.6% month-on-month in June, reversing course after a 1.7% drop in May.

Still, in congressional testimony on Wednesday and Thursday, Federal Reserve Chair Jerome Powell suggested it was still too early for the central bank to step in and dial back some ultra-accommodative monetary policies to rein in inflation, given the labor market and other areas of the economy still need to recover more fully from the pandemic.

"We continue to believe that too many people are focused on inflation ... it's been the predominant theme that we've been dealing with and talking to our clients [about]," Brian Belski, BMO Capital Markets chief investment strategist, told Yahoo Finance. "And I don't think that's going to go away any time soon."

Meanwhile, the corporate earnings results that have trickled in from major financial companies have also been mixed. Banks including Bank of America (BAC), JPMorgan Chase (JPM) and Morgan Stanley (MS) have topped consensus estimates on quarterly sales and earnings, but have also showed signs of slowing growth beneath the hood in core business segments, as loan demand and fixed-income trading came in lighter than expected.

Overall, however, expectations for second-quarter earnings season remain high, with consensus on Wall Street looking for aggregate S&P 500 earnings per share to grow by more than 60% over last year. Next week's influx of earnings reports, which will include some major names like Netflix (NFLX) and Johnson & Johnson (JNJ), will offer a fuller picture of how corporate America fared as more parts of the economy reopened in the spring and early summer.

"I think that we could see another quarter of beats until we get back to a Q4 where the comparison is a little tougher," Josh Wein, Hennessy Funds portfolio manager, told Yahoo Finance. "Things started to open up again in Q4 of 2020. And so, right now, I think we're seeing these nice beats and raises. It'll come back to Earth, I would suspect, in Q4, and certainly Q1."

4:00 p.m. ET: S&P 500, Dow and Nasdaq each erased earlier gains

Here's where markets closed on Friday

• S&P 500 (^GSPC): -32.95 (-0.76%) to 4,327.08

• Dow (^DJI): -300.09 (-0.86%) to 34,686.93

• Nasdaq (^IXIC): -115.90 (-0.80%) to 14,427.24

• Crude (CL=F): -$0.09 (-0.13%) to $71.56 a barrel

• Gold (GC=F): -$17.10 (-0.93%) to $1,811.90 per ounce

• 10-year Treasury (^TNX): +0.3 bps to yield 1.3000%

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3:45 p.m. ET: 'There's a chance' of a pullback of as much as 20%: Analyst

Despite Friday's equity market decline, stocks are currently still off just slightly from all-time highs. Given elevated stock valuations and a resurgence in concerns of COVID-19, investors should watch for a potential pullback later this year, according to at least one analyst.

“We all kind of forget that we did see a correction in September of last year," Matt Maley, managing director of Miller Tabak, told Yahoo Finance. "We seem to be setting up for that same kind of pullback."

"There’s a chance we get a surprising one and a deeper one that could go down as much as 15 to 20%,” he said. “It has nothing to do with the fundamentals or concerns about a recession ... But what we have is we have record levels of leverage in the system. Margin debt is at an all-time record high. And that doesn't become a problem until the market rolls over.”

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11:05 a.m. ET: Consumer sentiment posted a surprise drop in July as inflation concerns picked up: University of Michigan

The University of Michigan's closely watched consumer sentiment survey posted a surprise drop in the month of July, dipping to 80.8 from 85.5 in June. The preliminary monthly survey was expected to register at a level of 86.5.

The decline came alongside a jump in consumers' inflation expectations for the next year. Consumers now anticipate inflation will rise 4.8% in the next 12 months, marking the fastest expected rate since mid-2008. That's up from consumers' previous outlook for one-year inflation to rise by 4.3%.

“Inflation has put added pressure on living standards, especially on lower and middle income households, and caused postponement of large discretionary purchases, especially among upper income households," Richard Curtin, chief economist for the Surveys of Consumers, said in a statement.

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10:10 a.m. ET: What economists are saying about the June retail sales report

The surprise jump in retail sales in June came as a welcome surprise to market participants expecting consumer spending to moderate further after a stimulus-fueled surge earlier this year.

Here's what some economists said about the report, and what it suggests for the recovering economy:

• "Sales surged in March on the combination of stimulus check issuance and 'reopenings' in many areas, but the monthly changes have been more up-and-down since then for both the headline retail sales figure and the important control reading. Food services sales—an area benefitting significantly from reduced restrictions and concern about COVID-19—have continued to climb rapidly into June, rising another 2.3% that month." – Daniel Silver, JPMorgan Chase economist

• "The unexpected rise in retail sales combined with yesterday’s pandemic-era low of jobless claims are two more strong proof points that we are edging closer to a full economic recovery. While we are seeing consumers broadly look more towards services and activities, the expectations that people would be turning away from goods seems to have been a little overblown." – Mike Loewengart, E-Trade Financial managing director of investment strategy

• "Looking at the detail, the 2.6% m/m gain in clothing sales and the 3.3% m/m increase in electronics sales both stand out. They could reflect a continuing tailwind from those [stimulus] checks, although we suspect that higher prices also boosted the nominal dollar sales values." – Paul Ashworth, Capital Economics chief U.S. economist

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9:30 a.m. ET: Stocks open higher

Here's where markets were trading Thursday evening

• S&P 500 (^GSPC): +13.97 (+0.32%) to 4,374.00

• Dow (^DJI): +86.45 (+0.25%) to 35,073.47

• Nasdaq (^IXIC): +63.28 (+0.44%) to 14,605.85

• Crude (CL=F): +$0.49 (+0.68%) to $72.14 a barrel

• Gold (GC=F): -$3.80 (-0.21%) to $1,825.20 per ounce

• 10-year Treasury (^TNX): +3.5 bps to yield 1.332%

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8:32 a.m. ET: Retail sales unexpectedly rose in June

Retail sales posted a surprise gain in June after declining in May, the Commerce Department said Friday, in a print that underscored a still-strong demand side of the economy during the recovery.

Sales at retailers rose by a total of 0.6% in the U.S. in June month-on-month. Consensus economists were looking for a 0.3% monthly drop, according to Bloomberg data.

In May, retail sales fell by 1.7%. This was downwardly revised from a drop of 1.3% previously reported.

Sales categories relating to going back out helped drive the beat on headline retail sales in June. Department store sales gained 5.9% month-on-month, outpacing the gain in non-store retailers, or e-commerce platforms, with a monthly rise of 1.2%. Food services and drinking places saw sales rise 2.3%

Elsewhere, declines in other areas dragged down the overall headline number. Motor vehicle and parts dealers fell for a back-to-back month, dipping 2% in June. And furniture and home furnishing store sales fell 3.6% so clearly people not re-decorating their homes as much now that they are back to going out and going back into the office

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7:32 a.m. ET Friday: Stock futures gain ahead of retail sales

Here were the main moves in markets, as of 7:32 a.m. ET:

• S&P 500 futures (ES=F): +6.25 points (+0.14%) to 4,358.25

• Dow futures (YM=F): +38 (+0.11%) to 34,902.00

• Nasdaq futures (NQ=F): +25 (+0.17%) to 14,812.5

• Crude (CL=F): +$71.70 (+0.07%) to $71.70 a barrel

• Gold (GC=F): -$12.90 (-0.71%) to $1,816.10 per ounce

• 10-year Treasury (^TNX): +2.2 bps to yield 1.319%

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6:06 p.m. ET Thursday: Stock futures dip

Here's where markets were trading Thursday evening

• S&P 500 futures (ES=F): 4,348.00, -4 points (-0.09%)

• Dow futures (YM=F): 34,835.00, -29 points (-0.08%)

• Nasdaq futures (NQ=F): 14,777.00, -10.5 points (-0.07%)

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck