Dow closes lower after disappointing bank results
By Sinéad Carew
Jan 14 (Reuters) - The Dow closed lower with a big drag from financial stocks as investors were disappointed by fourth quarter results from big U.S. banks, which cast a shadow over the earnings season kick-off.
The Nasdaq and the S&P regained lost ground in afternoon trading to close higher. Meanwhile the consumer discretionary .SPLRCD also put pressure on major indexes after morning data showed a December decline in retail sales and a souring of consumer sentiment. JPMorgan Chase & Co JPM.N tumbled after reporting weaker performance at its trading arm. The bellwether lender also warned that soaring inflation, the looming threat of Omicron and trading revenues would challenge industry growth in coming months.
Along with JPMorgan, big decliners putting pressure on the Dow included Goldman Sachs GS.N , American Express AXP.N and Home Depot HD.N .
Citigroup Inc C.N shares fell after it reported a 26% drop in fourth-quarter profit, while asset manager BlackRock Inc BLK.N fell after missing quarterly revenue expectations.
The earnings kick-off had investors taking profits in the S&P 500 bank subsector .SPXBK after it had hit an intraday high in the previous session. Financial stocks had been outperforming the S&P recently as investors bet that the Federal Reserve's expected interest rate hikes will 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 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.
For consumer stock weakness, James pointed to "clearly disappointing" retail sales, which dropped 1.9% last month due to shortages of goods and an explosion of COVID-19 infections. Separate data showed soaring inflation hit U.S. consumer sentiment in January, pushing it to its second lowest level in a decade.
Retail sales and bank loan growth raised doubts about the economic outlook for the current quarter and 2022 for Keith Buchanan, portfolio manager at Globalt 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.
According to preliminary data, the S&P 500 .SPX> gained 2.89 points, or 0.06%, to end at 4,661.92 points, while the Nasdaq Composite .IXIC gained 81.98 points, or 0.55%, to 14,889.73. The Dow Jones Industrial Average .DJI fell 208.43 points, or 0.58%, to 35,905.19.
Analysts see S&P 500 companies earnings rising 23.1% in the fourth quarter, according to IBES data from Refinitiv.
One bright spot in the bank sector on Friday however was Wells Fargo & Co WFC.N , which gained ground after posting a bigger-than-expected rise in fourth-quarter profit.
Casino operators Las Vegas Sands LVS.N , Melco Resorts MLCO.O and Wynn Resorts WYNN.O rallied after Macau's government capped the number of new casino operators allowed to operate to six for a period of 10 years.
U.S. stock markets will remain shut on Monday for the public holiday in honor of Martin Luther King.
Additional reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in Bengaluru, Sinéad Carew in New York, Editing by Maju Samuel and Marguerita Choy
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.