The Dow on Friday closed lower dragged down by financial stocks as investors were disappointed by fourth quarter results from big US banks, which cast a shadow over the beginning of the earnings season.
The NASDAQ and the S&P regained lost ground in afternoon trading to close higher.
Consumer discretionary stocks put pressure on the indices throughout the session, after morning data showed a decline in retail sales and a souring of consumer sentiment last month.
JPMorgan Chase & Co tumbled after reporting weaker performance at its trading arm.
The bellwether lender also said that soaring inflation, the looming threat of the Omicron variant of SARS-CoV-2 and trading revenues would challenge industry growth in coming months.
Along with JPMorgan, big decliners putting pressure on the Dow included financial stocks Goldman Sachs Group Inc, American Express Co and home improvement retailer Home Depot Inc.
Photo: AFP
Citigroup Inc shares fell after it reported a 26 percent drop in fourth-quarter profit, while asset manager BlackRock Inc fell 2.2 percent after missing quarterly revenue expectations.
The S&P 500 bank subsector, which hit an intraday high in the previous session, closed down 1.7 percent. The sector has recently been outperforming the S&P as investors bet the US Federal Reserve’s expected interest rate hikes would boost bank profits.
“The bar was very high going into [JPMorgan] results. On the surface it was good but, under the hood, not so much,” said Michael James, managing director of equity trading at Wedbush Securities Inc in Los Angeles.
In the interest rate hiking cycle expected this year “positioning was very crowded on the long side” going into the earnings season, he said.
For consumer stock weakness, James pointed to “clearly disappointing” retail sales, which dropped 1.9 percent last month due to shortages of goods and an explosion of COVID-19 infections. Separate data showed that soaring inflation hit US consumer sentiment this month, pushing it to its second-lowest level in a decade.
Retail sales and bank loan growth raised doubts about the economic outlook for this quarter and this year for Keith Buchanan, portfolio manager at Globalt Inc in Atlanta.
“The question is, does the economy have enough strength to get through the risk Omicron brings as fiscal and monetary stimulus is rolling off,” Buchanan said.
The Dow Jones Industrial Average fell 201.81 points, or 0.56 percent, to 35,911.81, the S&P 500 gained 3.82 points, or 0.08 percent, to 4,662.85 and the NASDAQ Composite added 86.94 points, or 0.59 percent, to 14,893.75.
For the week, the S&P 500 fell 0.3 percent while the Dow fell 0.88 percent and the NASDAQ fell 0.28 percent.
At the end of the session, four out of 11 S&P sectors rose with energy leading gains.
An afternoon rally pushed the NASDAQ and the S&P to closing gains with help from rate-sensitive growth sectors, with technology closing up 0.89 percent and communications services adding 0.53 percent.
“There’s clearly some bargain hunting going on in technology today,” James said.
Analysts see S&P 500 companies earnings rising 23.1 percent in the fourth quarter, Institutional Brokers’ Estimate System data from Refinitiv showed.
However, one bright spot in the bank sector on Friday was Wells Fargo & Co, which rallied after posting a bigger-than-expected rise in fourth-quarter profit.
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