Stocks lower after a session of small gains and declines

U.S. stocks pulled further back from their records on Friday to cap the weakest week for the Standard & Poor’s 500 since May.

Indexes sloshed between small gains and losses for much of the day before turning lower in the afternoon after Iran said it had seized a British oil tanker, the latest escalation of tensions between Tehran and the West. Reined-in expectations for how deeply the Federal Reserve will cut interest rates at its next meeting also weighed on stocks.

The S&P 500 fell 18.50 points, or 0.6%, to 2,976.61. After setting its record high on Monday, the index seesawed mostly lower and lost 1.2% for the week.

The Dow Jones industrial average fell 68.77, or 0.3%, to 27,154.20, and the Nasdaq composite lost 60.75, or 0.7%, to 8,146.49.

Momentum for stocks has slowed since early June, when they began soaring on expectations that the Federal Reserve will cut interest rates for the first time in a decade to ensure the U.S. economy doesn’t succumb to weaknesses abroad. The Fed’s next meeting is scheduled for the end of this month.

Late Thursday, Treasury yields sank after comments by Fed officials raised expectations that they may cut rates by half a percentage point, rather than the typical quarter point. But yields climbed Friday as the market grew more convinced that the Fed will cut just 0.25 of a percentage point July 31.

“It could be 25 wasted,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co., who said a half-point cut would be more effective. “I think it’s more important to shock the market a bit and convince the market they’re serious about pushing inflation above 2%.”

The yield on the 10-year Treasury rose to 2.05% from 2.04% late Thursday. The two-year yield, which is more influenced by expectations of Fed moves on rates, climbed to 1.81% from 1.77%.

Until the Fed’s meeting, investors are focusing on whether companies can top the meager expectations Wall Street has for the profits they made during the spring. Microsoft jumped in morning trading after reporting stronger earnings for April through June than analysts expected, though it faded as the afternoon progressed and ended the day with just a 0.1% gain.

Several banks climbed after reporting strongerthan-expected earnings, but financial stocks in the S&P 500 were down overall.

“The biggest overall trend is, if you beat, you may be mildly rewarded, and if you miss, you are going to get pounded,” said J.J. Kinahan, chief market strategist for TD Ameritrade.

Energy stocks had the biggest gains in the S&P 500 after the price of oil climbed on worries about possible supply disruptions. Benchmark U.S. crude oil climbed 33 cents, or 0.6%, to settle at $55.63 after being down earlier in the day. Brent crude, the international standard, rose 54 cents, or 0.9%, to $62.47 per barrel.

Boeing had one of the biggest gains in the S&P 500, rising 4.5%, even though it said it will take a $4.9-billion charge to cover possible compensation it will pay airlines after the grounding of its 737 Max jet. That’s a huge number, analysts concede, but it may provide some certainty to investors who had worried that the payments could be much higher. Boeing also said the figure assumes that its 737 Max jets will return to service later this year, which would be earlier than some investors thought.

Gold fell $1.00 to $1,425.10 per ounce; silver was unchanged at $16.12 per ounce.

The dollar rose to 107.81 Japanese yen from 107.52 on Thursday. The euro weakened to $1.1219 from $1.1266.