Key Points:
- U.S. stocks plummeted amid disappointing bank earnings, evolving Federal Reserve policy expectations, and geopolitical tensions.
- Major indexes saw significant declines, with the S&P 500 and Dow Jones Industrial Average experiencing their largest weekly losses in months.
- Geopolitical tensions added to market uncertainty, contributing to the sell-off. All 11 sectors in the S&P 500 closed lower, with materials being hit the hardest.
- Shareholders approved a merger between U.S. Steel and Nippon Steel Corp., while semiconductor stocks faced pressure amid geopolitical concerns.
U.S. stocks witnessed a significant sell-off on Friday, driven by disappointing earnings results from major U.S. banks, against the backdrop of concerning inflation data, evolving Federal Reserve policy expectations, and geopolitical tensions. All three major indexes fell more than 1% and registered weekly losses.
The S&P 500 index recorded its largest weekly percentage loss since January, while the Dow Jones Industrial Average saw its steepest weekly decline since March 2023. Mike Dickson, head of research at Horizon Investments, noted that escalating inflation has intensified pressure on companies to deliver strong earnings this season, contributing to market jitteriness.
Results from top banks marked the unofficial start of the first-quarter earnings season. JPMorgan Chase & Co reported a 6% profit increase but fell short of expectations with its net interest income forecast, leading to a 6.5% share slide. Wells Fargo & Co’s profits fell 7%, and Citigroup posted a loss due to spending on employee severance and deposit insurance.
Economic data, particularly Wednesday’s Consumer Price Index report, suggested persistent inflation, prompting investors to adjust expectations regarding Federal Reserve rate cuts. Boston Fed President Susan Collins anticipates a couple of rate cuts this year, while Austan Goolsbee, president of the Chicago Fed, awaits the Personal Consumption Expenditures report for a clearer inflation picture. Geopolitical tensions heightened as Iran threatened retaliation against Israel for an airstrike on its embassy, further fueling the sell-off.
The Dow Jones Industrial Average fell 475.84 points, or 1.24%, to 37,983.24. The S&P 500 lost 75.65 points, or 1.46%, at 5,123.41, and the Nasdaq Composite dropped 267.10 points, or 1.62%, to 16,175.09. All 11 major sectors in the S&P 500 closed in the red, with materials suffering the steepest losses.
Advanced Micro Devices and Intel fell following reports of Chinese officials urging a shift away from foreign chips by 2027. U.S. Steel slid after shareholders approved a proposed merger with Nippon Steel Corporation.
