By Bansari Mayur Kamdar and Shreyashi Sanyal
(Reuters) – Wall Street’s main indexes fell on Friday as declines among heavyweight financial stocks led by JPMorgan made for a weak start to the fourth-quarter earnings season.
Eight of the 11 major S&P 500 sectors fell in early afternoon trading, with financials falling 1.3%. The S&P 500 banks index slid 1.8% from a record high hit in the previous session.
JPMorgan Chase & Co tumbled 5.3% on reporting weaker performance at its trading arm, even as it beat earnings expectations for the fourth quarter.
The bellwether lender also warned that soaring inflation, looming threat of Omicron and trading revenues returning to normal levels are set to challenge the banking industry’s growth in the coming months.
Citigroup Inc fell 2.2% after posting a 26% drop in fourth-quarter profit, while asset manager BlackRock Inc fell 1.6% after missing quarterly revenue expectations.
“You have the banks hit on their earnings today and that’s turned into a ‘sell value, buy tech’ type of warning and that’s typically what we’ve been seeing,” said Dennis Dick, markets structure analyst and proprietary trader at Bright Trading LLC in Las Vegas.
“So the money just keeps rotating back and forth between value and growth.”
Wells Fargo & Co, on the other hand, gained 3.3% after posting a bigger-than-expected rise in fourth-quarter profit.
Financials have outperformed the broader S&P 500 index on expectations of interest rate hikes by the Federal Reserve, firming Treasury yields and a rotation out of growth sectors such as technology, communication services and consumer discretionary.
Dick said investors will end up buying the dip in banks because a lot of them are still looking to put money into more value-oriented names and see it as a value-oriented market right now.
Analysts see S&P 500 companies earnings rising 23.1% in the fourth quarter, according to IBES data from Refinitiv.
Megacap growth companies including Apple Inc, Amazon.com Inc, Microsoft, Tesla and Meta were mixed a day after a selloff.
Data showed retail sales tumbled in December on shortages of goods and an explosion of COVID-19 infections, while separately, soaring inflation hit U.S. consumer sentiment in early January, which fell to the second lowest level in a decade.
At 12:05 p.m. ET the Dow Jones Industrial Average was down 279.84 points, or 0.77%, at 35,833.78, the S&P 500 was down 18.69 points, or 0.40%, at 4,640.34 and the Nasdaq Composite was down 14.75 points, or 0.10%, at 14,792.06.
Casino operators Las Vegas Sands, MGM Resorts, Wynn Resorts and Melco Resorts advanced between 0.2% and 16.6% after Macau’s government capped the number of new casino operators allowed to operate to six with an operating period of up to 10 years.
U.S. stock markets will remain shut on Monday on account of a public holiday.
Declining issues outnumbered advancers for a 2.96-to-1 ratio on the NYSE and for a 2.54-to-1 ratio on the Nasdaq. The S&P index recorded 24 new 52-week highs and one new low, while the Nasdaq recorded 40 new highs and 496 new lows.
(Reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel)
