U.S. stocks fell Friday following lackluster earnings reports from some of the country’s biggest banks and weaker-than-expected economic data, deepening a winter selloff.
All three major indexes opened Friday lower, briefly recovered from their early-session lows, then fell again. The S&P 500 was recently down 0.5%, while the Dow Jones Industrial Average was off 1%. The tech-heavy Nasdaq Composite retreated from earlier gains, losing 0.1%.
Stock futures started falling before the market’s open. JPMorgan Chase and Citigroup kicked off the latest quarterly earnings report season by disclosing double-digit percentage drops in profit ahead of the opening bell. Shares of those banks fell, followed by scores of other financial stocks.
Then came the release of weak economic retail and manufacturing data, reigniting concerns about the economy’s ability to fend off inflation and what that means for the Federal Reserve’s fiscal-tightening plan. Retail sales dropped by 1.9% in December, while industrial production dipped slightly for the first time in three months.
“The retail sales number was ugly, there’s no getting around it,” said Cliff Hodge, chief investment officer for Cornerstone Wealth. “It’s tough to say how much of the miss is related to inflation impacts, Omicron, or the roll-off of government benefits, but combined with some disappointing bank earnings this morning, the markets are likely in for a bit of a tough slog.”
The losses put all three indexes on track for another week of losses. The S&P 500 and Dow are down 0.9% and 1.3%, respectively, over the last five days, both on pace for a second straight weekly decline. The Nasdaq, off 1%, is on track for its third consecutive week in the red.
On Friday, financial stocks in the S&P 500 broadly fell, shedding 1.8% in recent trading. Shares of JPMorgan Chase slid 6%, and Citigroup dropped 1.8% after both banks posted declines in quarterly profit. Wells Fargo bucked the trend, adding 3%, after the bank reported that profit soared 86% in the final three months of 2021.
Manufacturers, material firms and consumer discretionary stocks were also down at least 1.4% following the economic data. Besides that, Sherwin-Williams declined 2.9% after the paint maker lowered its guidance, citing a shortage of raw materials amid supply-chain and labor constraints.
Earlier in the session, some light buying of large-cap growth stocks gave the market, and the Nasdaq, some support, as investors returned to a trade that tends to work well during periods of economic uncertainty. However, those gains narrowed as the day wore on. Facebook parent Meta Platforms remained up 1.7%, while Microsoft and Alphabet gained 1.2% and 0.9%, respectively.
Energy stocks jumped 1.9%, getting a fresh boost from a climb in oil prices.
Casino stocks including Las Vegas Sands and Wynn Resorts jumped after Macau released a draft law that would cut the tenure for new casino licenses in half, but wouldn’t reduce the number of licenses. Las Vegas Sands added 11%, and Wynn Resorts gained 7.5%.
Meanwhile, bond yields resumed their climb. Expectations for an interest-rate rise as soon as March have caused some investors to sell government bonds, pushing up yields. The yield on the benchmark 10-year Treasury note ticked up to 1.774% Friday, from 1.708% Thursday.
“Equity markets will continue to take their cues from the bond market,” said Hugh Gimber, a strategist at J.P. Morgan Asset Management. “What’s becoming clear is the Fed is realizing that inflationary pressures are larger and more broad-based than they previously expected.”
Cryptocurrency dogecoin jumped 12% from its 5 p.m. ET level Thursday after Elon Musk said Tesla was accepting payment for some merchandise with the currency, which was originally started as a joke. Bitcoin was recently down less than 1%.
Overseas, the pan-continental Stoxx Europe 600 fell 1%.
South Korea’s central bank raised interest rates to pre-pandemic levels to fight inflation, and signaled that more increases could come this year. The country’s benchmark Kospi index declined 1.4%. Other major Asian stock indexes also closed lower. China’s Shanghai Composite fell 1%, and Japan’s Nikkei 225 shed 1.3%.
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