Stocks Drop as Investors Turn on Banks, Financials: Markets Wrap

By Sarah Ponczek and Janine Wolf

With assistance by Adam Haigh, Grant Smith, and Robert Brand

Source: Bloomberg.com

  • JPMorgan, Citigroup earnings top expectations, shares fall
  • Crude resumes its climb, Treasuries rise, dollar steady

U.S. stocks turned lower as weakness in bank stocks added to the political and trade uncertainty hanging over the market. Treasury yields fell and oil rose for a fifth straight day, bringing its weekly gain to almost nine percent.

All major indexes were down with the financial sector leading the way on a decline of around 1.5 percent. Wells Fargo & Co. warned that it’s better than anticipated first-quarter results may change as a settlement with regulators looms, loans dropped and mortgage-banking results trailed expectations. JPMorgan Chase & Co. and Citigroup Inc. posted quarterly results that topped analysts’ expectations, but shares of both companies were lower as JPMorgan Chief Executive Officer Jamie Dimon said “the environment is intensely competitive and lending was flat for the quarter.”

“In come the financial results, which generally were fine, but I think that what you’re getting is you’re getting a very high expectation for earnings season, which makes me a little bit nervous as we go into this,” said Tom Essaye, founder of ‘The Sevens Report.’ “People are expecting huge earnings. And the numbers from the banks this morning were fine, there were gives and takes as there always are, there wasn’t really anything bad in it, but I think once that got out and it wasn’t another positive catalyst, you just saw people come in and sell the market.”

The market’s focus also is on political uncertainty surrounding President Donald Trump, potential military activity in Syria and trade tensions between the U.S. and China. On Thursday, President Donald Trump expressed optimism on trade deal with China and hinted that the U.S. may rejoin the Trans-Pacific Partnership free-trade deal that he pulled out of shortly after taking office.

“Thus far it’s really all been theater,” Brad McMillan, chief investment officer for Commonwealth Financial Network, said of the trade issues. “Where we might actually start to see it show up in the market again is if companies start talking about the effect of the tariffs on their earnings calls. I think it’s fairly likely that it will at least be mentioned. A lot of companies look for reasons to kind of dial down expectations, and this certainly is a very real one, even though it’s theoretical at the moment.”

The Stoxx Europe 600 Index rose but retreated from an earlier climb to a six-week high, led by raw-material producers as industrial and precious metals advanced. Aluminum headed for its biggest weekly increase since at least 1987 on concern U.S. sanctions on Russia’s United Co. Rusal will disrupt supplies.

Meanwhile, the dollar was steady. Sterling climbed to the strongest level against the euro in almost a year against as investors bet on a Bank of England interest-rate hike next month, after the European Central Bank revealed a dovish slant in the account of its March meeting published Thursday.

Terminal users can read more in our markets live blog.

Here are the main moves in markets:

Stocks

The S&P 500 Index was down less than 0.3 percent to 2,657.32 as of 11:21 a.m. in New York, while the Nasdaq 100 Index slid 0.3 percent.

The Stoxx Europe 600 gained 0.1 percent.

The MSCI All-Country World Index dipped 0.1 percent.

The MSCI Asia Pacific Index climbed 0.1 percent.

The MSCI Emerging Market Index fell 0.6 percent.

Currencies

The Bloomberg Dollar Spot Index was little changed.

The euro was little changed at $1.2326.

The British pound increased 0.2 percent to $1.4251.

The Japanese yen declined 0.2 percent to 107.51 per dollar.

Bonds

The yield on 10-year Treasuries fell one basis point to 2.82 percent.

Germany’s 10-year yield dipped one basis point to 0.51 percent.

Britain’s 10-year yield dropped two basis points to 1.44 percent.

Commodities

West Texas Intermediate crude gained 0.5 percent to $67.37 a barrel.

Gold rose 0.8 percent to $1,345.12 an ounce.

Copper increased 0.2 percent to $3.07 a pound.

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