Wall Street on Friday closed lower as a barrage of mixed economic data appeared to affirm another US Federal Reserve interest rate hike, dampening investor enthusiasm after a series of big US bank earnings launched first-quarter reporting season.
All three major US stock indices closed in the red, but well off session lows. On the heels of Thursday’s robust rally, all three major US stock indices notched weekly gains.
“Today we’re taking bit of a breather,” said Sal Bruno, chief investment officer at IndexIQ in New York. “After yesterday’s sharp move up, the market might have gotten a little ahead of itself.”
Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co beat earnings expectations, benefiting from rising interest rates and easing fears of stress in the banking system.
“As expected, the bigger banks were probably not harmed that much by the regional banking turmoil, and possibly even beneficiaries of it,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “We saw mostly strong and healthy balance sheets, and it’s pretty clear [the regional banking] crisis isn’t systemic.”
The S&P 500 banking sector rose 3.5 percent and JPMorgan Chase surged 7.6 percent, its biggest one-day percentage gain since Nov. 9, 2020.
Photo: Reuters
Citigroup advanced 4.8 percent, while Wells Fargo edged 0.1 percent lower.
A slew of mixed economic data including retail sales, industrial production and consumer sentiment cemented expectations that the Fed will hike rates another 25 basis points at next month’s policy meeting.
“Industrial production and capacity utilization came in stronger than expected,” Bruno added. “Both point to an economy that still has some vibrancy, which gives Fed cover to continue its rate hike policy in May possibly into June.”
Those expectations were underscored by Atlanta Fed President Raphael Bostic, who said that another 25 basis point hike could allow the Fed to end its tightening cycle, even as Chicago Fed President Austan Goolsbee called for the central bank to be prudent.
At last glance, financial markets have priced in a 74 percent likelihood of that happening, CME Group’s FedWatch tool showed.
The Dow Jones Industrial Average fell 143.22 points, or 0.42 percent, to 33,886.47, but gained 1.2 percent weekly; the S&P 500 lost 8.58 points, or 0.21 percent, at 4,137.64, but rose 0.79 percent from the previous week; and the NASDAQ Composite dropped 42.81 points, or 0.35 percent, to 12,123.47, while increasing 0.29 percent for the week.
Among the 11 major sectors of the S&P 500, seven ended the session lower, with real estate falling most. Financials enjoyed the biggest percentage increase, advancing 1.1 percent.
First-quarter earnings season hits full stride next week, with results expected from several high-profile companies including Goldman Sachs Group Inc, Morgan Stanley, Bank of America Corp, Netflix Inc and a long list of regional banks and industrials.
Analysts have lowered expectations, forecasting aggregate S&P 500 earnings having fallen by 4.8 percent from a year ago, a reversal of the 1.4 percent year-on-year gain seen at the beginning of the quarter, Refinitiv data showed.
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