Stephen Culp
NEW YORK (Reuters) – U.S. stocks sold off on Friday after results from major U.S. banks underwhelmed, capping a week marked by market-heavy inflation data, changing expectations for U.S. Federal Reserve policy and looming geopolitical tensions.
All three major indexes fell more than 1% and posted losses for the week.
“When we look at what’s happened in the macro space, inflation has taken a turn for the worse, and that puts more pressure on companies to deliver earnings this season,” said Mike Dixon, head of research at Horizon Investments in Charlotte, North Carolina. . . “Everyone is a little nervous about the intense focus on how good earnings need to be.”
Results from three major banks marked the unofficial start of first-quarter earnings season.
JPMorgan Chase & Co (NYSE:), the largest US bank by assets, reported profit growth of 6%, but its forecast for net interest income fell short of expectations. The company’s shares fell after the report.
Wells Fargo & Co shares fell slightly after earnings fell 7% as net interest income fell due to weak borrowing demand.
Citigroup posted a loss after spending on employee severance and deposit insurance.
Economic data this week, particularly Wednesday’s stronger-than-expected CPI report, suggests inflation may be more resilient than previously thought, prompting investors to revise expectations for the timing and extent of Federal Reserve rate cuts. US system this year.
“There’s a very real risk that we won’t get any rate cuts this year,” Dixon said, adding that while he doesn’t expect a hike, the Fed would likely prefer to keep rates higher for longer. time.
“There’s just no data you can look at right now that says the Fed should cut rates.”
Boston Fed President Susan Collins said she expects several rate cuts this year, although inflation may take some time to return to target.
Austan Goolsbee, president of the Chicago Fed, said he remains focused on the personal consumer expenditures (PCE) report, due April 26, to get a clearer picture of whether inflation is moving toward the central bank’s target.
Geopolitical tensions continued to mount as Iran threatened to retaliate against Israel for an April 1 airstrike on its embassy in Damascus, adding impetus to the sell-off.
“Geopolitical risks are difficult to define, but they may keep energy prices rising, which will not help the CPI situation.”
The investor anxiety index reached its highest level since October 2023.
The S&P 500 lost 75.46 points, or 1.45%, to close at 5,123.60, while the Nasdaq Composite lost 266.50 points, or 1.62%, to 16,175.09, according to preliminary data. The Dow Jones Industrial Average fell 478.29 points, or 1.24%, to 37,980.79.
Shares of Advanced Micro Devices (NASDAQ:) and Intel (NASDAQ:) fell after reports earlier this year that Chinese officials ordered the country’s largest telecom company to phase out foreign chips by 2027.
US Steel shares fell after shareholders voted to approve a proposed merger with Nippon Steel Corporation.