Wall St ends sharply lower on mixed earnings, sticky inflation,
geopolitical fears
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[April 13, 2024] By
Stephen Culp
NEW YORK (Reuters) -U.S. stocks sold off on Friday after major U.S.
banks' results failed to impress, capping a week marked by market-moving
inflation data, evolving expectations for U.S. Federal Reserve policy,
and looming geopolitical tensions.
All three major indexes fell more than 1%, and registered losses on the
week.
The S&P 500 index notched its biggest weekly percentage loss since
January, while the Dow Jones Industrial Average's weekly loss was its
steepest since March 2023.
"When we look at what's happened in the macro space, inflation has taken
a turn for the worse and that has put more pressure on companies to
deliver this earnings season," said Mike Dickson, head of research at
Horizon Investments in Charlotte, North Carolina. "Everyone's a bit
jittery with intense focus on how good earnings need to be."
Results from a trio of big banks marked the unofficial launch of
first-quarter earnings season.
JPMorgan Chase & Co, the biggest U.S. bank by assets, posted a 6% profit
increase but its net interest income forecast fell short of
expectations. Its shares slid 6.5%.
Wells Fargo & Co's stock inched lower after profits fell 7% as net
interest income dropped on weak borrowing demand.
Citigroup posted a loss after spending on employee severance and deposit
insurance. Its stock dipped 1.7%.
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Economic data this week, particularly Wednesday's hotter-than-expected
Consumer Price Index report, has suggested that inflation could be
stickier than previously thought, prompting investors to reset
expectations about the timing and extent of the U.S. Federal Reserve's
rate cuts this year.
"It's a very real risk that we won't get any rate cuts this year,"
Dickson said, adding that while he does not expect a hike, the Fed would
probably prefer to keep rates higher for longer.
"There's just no data point that you can actually look at right now that
says the Fed should cut rates."
Boston Fed President Susan Collins said she expects a couple of rate
cuts this year, even though it could take inflation some time to return
to its targeted level.
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Traders work on the trading floor at the New York Stock Exchange
(NYSE) in New York City, U.S., April 4, 2024. REUTERS/Andrew Kelly
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Austan Goolsbee, president of the Chicago Fed, said he remains
focused on the Personal Consumption Expenditures (PCE) report due on
April 26 for a clearer picture of inflation's progress toward the
central bank's target.
Geopolitical tensions continue to simmer as Iran threatened to take
revenge on Israel for the April 1 airstrike on its embassy in
Damascus, adding momentum to the sell-off.
"Geopolitical risks are difficult to nail down but they could keep
energy prices elevated, which would not be helpful to for the CPI
situation."
The Dow Jones Industrial Average fell 475.84 points, or 1.24%, to
37,983.24. The S&P 500 lost 75.65 points, or 1.46%, at 5,123.41 and
the Nasdaq Composite dropped 267.10 points, or 1.62%, to 16,175.09.
All 11 major sectors in the S&P 500 closed in the red, with
materials suffering the steepest percentage loss.
Advanced Micro Devices and Intel fell 4.2% and 5.2%, respectively,
following a report that Chinese officials told the country's largest
telecom firm earlier this year to phase out foreign chips by 2027.
U.S. Steel slid 2.1% after shareholders voted to approve a proposed
merger with Nippon Steel Corporation.
Declining issues outnumbered advancers on the NYSE by a 4.19-to-1
ratio; on Nasdaq, a 3.16-to-1 ratio favored decliners.
The S&P 500 posted 12 new 52-week highs and nine new lows; the
Nasdaq Composite recorded 35 new highs and 211 new lows.
Volume on U.S. exchanges was 11.67 billion shares, compared with the
11.41 billion average for the full session over the last 20 trading
days.
(Reporting by Stephen Culp; Additional reporting by Shashwat Chauhan
and Shristi Achar A in Bangalore; Editing by Richard Chang)
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