Stocks Fall Amid Bank Earnings

US stocks fell on Friday after lackluster earnings reports from some of the country’s largest banks and weaker-than-expected economic data deepened the winter sell-off.

On Friday, the three major indexes opened lower before recovering from their lows early in the session. The S&P 500 was recently down 0.4%, while the Dow Jones Industrial Average was down 0.8%. The high-tech Nasdaq Composite pulled back from earlier gains, losing 0.2%.

Stock futures started trending lower before the market opened. JPMorgan Chase and Citigroup kicked off the latest quarterly earnings reporting season by disclosing a double-digit percentage drop in earnings before the opening bell. The shares of those banks started moving lower, followed by dozens of other financial stocks.

Weak economic data followed, reigniting concerns about the economy’s ability to fend off inflation and what that means for the Fed’s fiscal tightening plan. Retail sales fell 1.9% in December, while industrial production fell slightly for the first time in three months.

“The retail sales number was ugly, and it’s not going to get around,” said Cliff Hodge, chief investment officer at Cornerstone Wealth. “It’s hard to quantify the error associated with the effects of inflation, Omicron, or government interest initiation, but combined with some disappointing bank earnings this morning, the markets are likely to go through a bit of a tough squeeze.”

Financial stocks led the market lower, falling 1.4%. Shares of JPMorgan Chase fell 4.8% and Citigroup fell 3% after both banks reported a decline in quarterly profits. Wells Fargo added 2.1% after the bank reported earnings rose 86% in the last three months of 2021.

BlackRock posted higher quarterly earnings, and market gains pushed the investment firm’s assets under management to more than $10 trillion. Despite this, its shares fell 1.7%.

Manufacturers, materials companies, and consumer discretionary stocks fell at least 0.8% following the economic data. Besides, Sherwin-Williams stock fell 1.7% after the paint maker cut its guidance, citing a shortage of raw materials amid supply chain and labor restrictions.

Some light buying in high-growth stocks gave the market, and the Nasdaq, some support, as investors returned to trade that tends to do well during periods of economic uncertainty. Technology stocks in the S&P 500 rose 0.5%, followed by a 0.2% gain among telecom services stocks.

Energy stocks jumped more than 1%, getting a fresh boost from higher oil prices.

Casino stocks including Las Vegas Sands and Wynn Resorts jumped after Macau passed a bill that would cut the term of new casino licenses in half, but would not reduce the number of licenses. Las Vegas Sands added 14%, and Wynn Resorts gained 8.4%.

The US dollar last year saw the biggest increase in its value since 2015. This is good for many US consumers, but it could also affect stocks and the US economy. WSJ’s Dion Rabouin explains. Image caption: Sebastian Vega/The Wall Street Journal

Meanwhile, bond yields resumed their rally. Expectations of higher interest rates as soon as March caused some investors to sell government bonds, driving up yields. The yield on the benchmark 10-year Treasury rose to 1.761% on Friday from 1.708% on Thursday.

“Stock markets will continue to take their cues from the bond market,” said Hugh Jimber, strategist at JPMorgan Asset Management. “What is becoming clear is that the Federal Reserve recognizes that inflationary pressures are greater and more extensive than they previously expected.”

Higher returns have prompted investors to exit technology stocks.


Photo:

Courtney Crowe/The Associated Press

Cryptocurrency dogecoin jumped 12% from the ET level at 5 pm on Thursday after Elon Musk said that Tesla was accepting payment for some goods with currency, which was originally started as a joke. The price of Bitcoin recently fell by less than 1%.

Offshore, the Stoxx Europe 600 Continental Index is down 1%. EDF‘s

Shares fell 15.4% in Paris trading after France prevented the utility company from passing on high energy prices entirely to consumers.

South Korea’s central bank raised interest rates to pre-pandemic levels to fight inflation, and indicated more increases could come this year. The country’s benchmark Kospi was down 1.4%.

Other major Asian stock indices also closed lower. China’s Shanghai Composite Index is down 1%, and Japan’s Nikkei 225 Index is down 1.3%.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

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