Stocks fell on Friday to add to losses after Thursday’s tech-driven sell-off, as investors watched a mixed batch of bank earnings and a larger-than-expected drop in US retail sales.
The Standard & Poor’s 500, the Dow and the Nasdaq all declined. The Dow was underperforming, falling more than 1% just after the market opened as the bank’s stock component of the index slipped after posting profits. Shares of JPMorgan Chase (JPM) fell after the company reported lower-than-expected trading revenue for the fourth quarter and higher costs as compensation expenses increased.
On the other hand, shares of peer bank Wells Fargo (WFC) rose after reporting quarterly revenue that beat estimates as business and consumer loans rose at the end of last year.
Fresh economic data came in weaker than expected on Friday, adding to the risk aversion tone in the markets. US retail sales fell 1.9% in December month-on-month, missing estimates of just 0.1% and the biggest drop since February 2021. November sales were also revised down to show a 0.2% monthly increase, compared to the reported 0.3% rise. Previously.
Investors this week were weighing signs of concern about persistent price pressures across the US economy against assurances from key central bank officials that the Federal Reserve is ready to take action to reduce inflation.
At Fed Governor Lyle Brainard’s hearing before the Senate Banking Committee on Thursday, she suggested that the central bank could start raising interest rates — a move that would tighten financial conditions and help lower inflation — “once it ends asset purchases.” The Federal Reserve is currently preparing to end the process of reducing asset purchases in March.
Lauren Gilbert, CEO of WealthWise Financial, “What we are seeing now is re-pricing of the markets, given the expected hikes in interest rates… Yahoo Finance Live on Thursday. “It’s going to be a wild ride.”
Several economists have suggested that the latest batch of inflation data thus far has helped strengthen the case for a near-term move on monetary policy. Thursday’s Producer Price Index (PPI) showed the largest annual rise in wholesale prices ever, in data going back to 2010, even as monthly price gains eased slightly. This report came just a day after the release of the December CPI which showed the largest rise in inflation since 1982. Several economists have suggested that inflationary pressures will persist at least through the first months of this year before easing off gradually.
“One of the biggest things has been the supply chain disruptions and financial stimulus,” Matthew Miskin, senior investment strategist involved at John Hancock Investment Management, told Yahoo Finance Live. “As the pandemic is brought under control this year, hopefully the Omicron wave will dissipate, we are likely to see the supply chain disruptions come to fruition and then we won’t get any more fiscal stimulus… and that from our point of view is causing inflation to come down over the course of the year” .
The price hike also affected the profits of companies with the rise in labor costs. Of the nearly two dozen S&P 500 companies that reported fourth-quarter earnings results as of midweek, 60% indicated a negative impact from higher labor costs or a lack of sales or profits, according to FactSet.
9:30 a.m. ET: Stocks open lower after disappointing economic data, mixed bank earnings
Here is where the markets were trading after the opening bell on Friday morning:
Standard & Poor’s 500 (^ Salafist Group for Preaching and Combat): -28.25 (-0.61%) to 4630.78
dow (^ DJI): -337.64 (-0.76%) to 35775.98
Nasdaq (^ ninth): -51.93 (-0.34%) to 1476.56
raw (CL = F.): +0.56 dollars (+0.68%) to 82.68 dollars per barrel
gold (GC = F.): + $3.90 (+0.21%) to $1,825.30 per ounce
Treasury for 10 years (^ degeneration): +2.5 basis points to produce 1.734%
8:32 a.m. ET: Retail sales fell 1.9% in December, below estimates
Retail sales fell more than expected in December, as consumer spending fell from earlier in 2021.
The US Commerce Department said Friday that the total value of US retail sales fell 1.9% in December compared to November. It was the first monthly drop since July, and the biggest drop since February 2021. Consensus economists were looking for a drop of just 0.1%, according to Bloomberg data. In November, retail sales rose 0.2%, with that number also revised down. From 0.3% rise previously. mentioned.
By category, out-of-store retailers, or e-commerce stores, saw the largest drop in monthly retail sales by far, falling 8.7% in December. Department stores also reported a 7.0% drop in sales, and furniture and home furnishings sales fell 5.5%. However, the weakness was widespread in December, and nearly every category of retailer saw a monthly decline in sales. Notably, building materials stores saw sales up nearly 1% during the month and miscellaneous retailers sales up 1.8%.
7:43AM ET: “Economy continues to do well despite headwinds related to the Omicron variant”: Dimon
Jamie Dimon, CEO of JPMorgan Chase, spoke on an optimistic note about the trajectory of the economic recovery even in light of the recent turmoil caused by the rapidly spreading Omicron variable.
“The economy continues to do well despite headwinds related to the Omicron variable, inflation and supply chain bottlenecks,” Dimon said in the bank’s fourth-quarter earnings report on Friday. “Credit continues to improve with exceptionally low net costs, and we remain optimistic about US economic growth as business sentiment is upbeat and consumers benefit from job and wage growth.”
JPMorgan Chase and Wells Fargo cited increased borrowing as a contribution to results at the end of last year, indicating that consumers and businesses were confident in borrowing and spending.
However, JPMorgan’s fixed-income and stock-trading companies saw sales decline compared to last year. Fixed income sales and trading revenue declined 16% year-over-year to $3.33 billion, which the bank attributed to a “challenging pricing environment, as well as lower revenue in credit, currencies and emerging markets compared to a strong prior year.” Shares sales and trading revenue fell 1.8% to $1.95 billion.
Overall, adjusted revenue grew 0.6% year-over-year to $30.35 billion, topping estimates of $30.01 billion, according to Bloomberg data. Earnings per share came to $3.33, beating expectations of $2.99.
7:32AM ET Friday: Stock futures give up earlier gains, point to lower open
Here is where the markets were trading before the opening bell:
S&P 500 futures contracts (ES = F.): -5 points (-0.11%) to 4,647.00
Dow futures contractsYM = F.): -37 points (-0.1%) to 35,952.00
Nasdaq futures contractsNQ = F.): -30.75 points (-0.2%) to 15,459.50
raw (CL = F.): +0.58 dollars (+0.71%) to 82.70 dollars per barrel
gold (GC = F.): + 0.90 dollars (+ 0.05%) to 1822.30 dollars per ounce
Treasury for 10 years (^ degeneration): +3.3 basis points to produce 1.742%
6:01PM ET Thursday: Stock futures open slightly higher
Here’s where the markets are trading Thursday night:
S&P 500 futures contracts (ES = F.): +4.25 points (+0.09%) to 4,656.25 points
Dow futures contractsYM = F.): +37 points (+0.1%) to 36,026.00
Nasdaq futures contractsNQ = F.): +18.75 points (+0.12%) to 15,509.00
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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