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Soft U.S. economic data weighed on the dollar and Treasury yields on Friday and pressured stock prices, but Wall Street's losses were mitigated by continued gains in oil prices and the Nasdaq inched up for a second straight record high.

Short covering helped extend the rally in oil prices, which tallied their biggest weekly advance since April.

The U.S. Dollar Index, a measure of the dollar against a basket of major currencies, also fell 0.26 percent to 95.66 as of 17:00 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions.

U.S. retail sales were unexpectedly flat in July as Americans cut back on discretionary spending, pointing to a moderation in consumption that could temper expectations of a sharp pickup in economic growth in the third quarter.

Other data on Friday showed that producer prices recorded their biggest drop in nearly a year in July amid declining costs for services and energy goods. Cooling consumer spending and tame inflation suggest the Federal Reserve will probably not raise interest rates anytime soon despite a robust labor market.

"Fed members are afraid to come out from under their rocks until growth is sustainably solid and inflation in, near or at their target, and today's reports don't provide them with any comfort that will happen soon," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

July's unchanged retail sales reading followed an upwardly revised 0.8 percent increase in June, the Commerce Department said. Retail sales in June were previously reported to have increased 0.6 percent. Sales rose 2.3 percent from a year ago.

Motor vehicle sales increased 1.1 percent last month. Rising demand for autos is pulling spending away from discretionary items, including sporting goods, whose sales in July suffered their biggest drop since January 2015.

Excluding automobiles, gasoline, building materials and food services, retail sales were also unchanged last month after rising 0.5 percent in June. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Separately, the Labor Department said its producer price index for final demand dropped 0.4 percent last month, the first decline since March and the largest since September 2015. It increased 0.5 percent in June.

In the 12 months through July, the PPI slipped 0.2 percent. That was the biggest drop since December 2015 and followed a 0.3 percent increase in the 12 months through June.

According the CME 30-day Fed fund futures, expectations are relatively stable in the near term with markets only pricing in a 12% chance that the U.S. central bank will hike rates in either September or November.

However, Friday’s weaker economic data has caused expectations for a December rate hike to fall. Currently markets see a 38% chance of a rate hike by the end of the year, down significantly from 52% priced in Thursday.

Expectations in early 2017 have also dropped, with markets pricing in a 42% chance for a rate hike in February, down from 52% priced in Thursday. For March, Fed funds are pricing in a 47% chance the Fed pulls the trigger, down from 59% seen Thursday.

Analysts have noted that the Fed has never hiked interest rates when markets have priced in a less than 50% chance of a move.

U.S. crude settled up $1 at $44.49 after touching its highest level since July 22 at $44.60 per barrel.

Oil rose about 2 percent on Friday, clinching its biggest weekly gains since April, after a short covering rally was triggered by comments from Saudi Arabia's oil minister in the previous session about possible action to help stabilize the market.

China’s leaders plan to underpin demand with fiscal support and view interest rates as being at "appropriate" levels, according to glimpses of their thinking seen in the International Monetary Fund’s yearly review of the economy.

"The authorities emphasized that monetary and fiscal policies would provide a supportive environment for supply-side restructuring," IMF staff wrote in the report on its Article IV consultations. "They viewed the level of interest rates as appropriate from a cyclical perspective. They expected credit growth to normalize in the remainder of the year."

Flagged as "authorities’ views," the IMF report contains rare insight into how China’s communist leaders view the pace of reform, the economic environment, and currency policy.

Japan's economic growth ground to a halt in April-June after a stellar expansion in the previous quarter on weak exports and capital expenditure, government data showed on Monday, underscoring the fragile nature of the recovery.

The world's third-largest economy expanded by an annualized 0.2 percent in the second quarter, less than a median market forecast for a 0.7 percent increase, Cabinet Office data showed on Monday.

Reference: Kitco, Reuters, Xinhua, Bloomberg