Dow closes lower when bank stocks fall

The stock market’s winter sales deepened this week, pushing all three major indices further down to minus for 2022.

The S&P 500 and Dow Jones Industrial Average both fell for the second week in a row, while the Nasdaq Composite has fallen the past three. Investors continued to sell bonds, pushing the yield on the leading 10-year US government bond up for the fourth week in a row, noting the biggest rise over that stretch since mid-March.

Investors are still assessing the outlook for interest rates and how fast the Federal Reserve will move to tame inflation, which is shaking the stock and bond markets. At the same time, an increase in Covid-19 cases has weighed the mood, although there are signs of infections can approach a peak.

The week started on shaky footing, with shares largely falling and the Nasdaq approaching a correction before closing a little higher. On Tuesday, Fed Chairman Jerome Powell confirmed the central bank’s view that inflation is likely to peak in the middle of the year, while suggesting that interest rates will remain low. It helped stop a streak of declines for the S&P 500 and Dow industrials.

Equities, particularly hard-hit sectors such as technology, seemed to be regaining some ground. But new price data released on Wednesday and Thursday showed that inflation remained warm last month, complicating the outlook. Shares fell Thursday, led by a 2.5% drop in Nasdaq.

Weak earnings from some major U.S. banks, along with weak retail and manufacturing data, sent most of the market down again on Friday, until a buying rush in the late session pushed the S&P 500 and Nasdaq back into positive territory. The S&P 500 added 3.82 points or less than 0.1% to 4662.85, and the Nasdaq rose 86.94 points or 0.6% to 14893.75. The Dow index fell 201.81 points, or 0.6%, to 35911.81.

“We expect a more volatile environment with big up-days and big down-days. The perception of inflation will be a driving force towards the market,” said David Donabedian, Chief Investment Officer of CIBC Private Wealth US. . ”

The late Friday turn was not enough to ward off another downturn week. The S&P 500 and Nasdaq ended up falling 0.3% over the last five trading days, while the Dow fell 0.9%. The markets are closed Monday for Martin Luther King Jr. Day, which shortens next week’s trading plan.

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On Friday, the first dose of fourth-quarter corporate earnings reports gave investors a sober view of corporate growth this year. The quarterly profit fell by double-digit percentages at

JPMorgan Chase

and

Citigroup,

end a hot streak big gains for most of 2021.

Shares of

JPMorgan Chase

fell $ 10.34, or 6.1%, to $ 157.89, and

Citigroup

fell 85 cents, or 1.3%, to $ 66.93.

Wells Fargo

received the trend and added $ 2.06 or 3.7% to $ 58.06 after the bank reported that profit increased 86% in the last three months of 2021.

Black stone

with higher quarterly results, and market gains lifted the investment firm’s assets under management over $ 10 trillion. Despite that, its shares fell $ 18.98, or 2.2%, to $ 848.60.

Still, analysts remain optimistic about corporate profits and predict growth across the S&P 500. Mark Haefele, chief investment officer at UBS Global Wealth Management, said he expects another positive quarter with 30% earnings growth over the previous year.

Manufacturers, materials companies and discretionary consumer stocks also fell according to the economic data. Besides the,

Sherwin-Williams

fell $ 8.93, or 2.8%, to $ 308.46 after the paint manufacturer lowered its guidelines, citing a shortage of raw materials in the middle of the supply chain and work restrictions.

Rising interest rates have motivated investors to rotate out of technology stocks.


Photo:

Courtney Crow / Associated Press

Some purchases of large growth stocks gave the market and Nasdaq some support as investors returned to a trade that tends to work well during periods of economic uncertainty.

Facebook

Parent

Meta platforms,

Microsoft,

Tesla

and

Netflix

all increased more than 1%.

Energy shares rose 2.4% and received a boost from an increase in oil prices.

Casino shares included

Las Vegas Sands

and

Wynn Resorts

jumped after Macau issued a draft law that would halve the employment period for new casino licenses, but would not reduce the number of licenses. Las Vegas Sands added $ 5.33, or 14%, to $ 42.99, and Wynn Resorts achieved $ 7.24, or 8.6%, to $ 91.47.

Meanwhile, bond yields resumed their rise. Expectations of a rise in interest rates as early as March have led some investors to sell government bonds, which has pushed up interest rates. The yield on the leading 10-year government bond ticked up to 1.771% on Friday from 1.708% on Thursday.

“Stock markets will continue to take tracks from the bond market,” said Hugh Gimber, a strategist at JP Morgan Asset Management. “What is becoming clear is that the Fed is realizing that inflationary pressures are greater and more broad-based than previously expected.”

Cryptocurrency dogecoin jumped 12% from its 5 pm ET level Thursday after Elon Musk said Tesla accepted payment for some merchandise with the currency, which was originally started as a joke. Bitcoin recently fell by less than 1 percent.

Abroad, the pan-continental Stoxx Europe 600 fell 1%.

South Korea’s central bank raised interest rates to pre-pandemic levels to combat inflation and signaled that there could be more increases this year. The country’s benchmark Kospi index fell 1.4 per cent. Other major Asian stock indices also closed lower. China’s Shanghai Composite fell 1% and Japan’s Nikkei 225 fell 1.3%.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Michael Wursthorn at michael.wursthorn@wsj.com

Corrections and reinforcements
For the week, the Dow Jones Industrial Average fell 0.9% and the Nasdaq Composite fell 0.3%. An earlier version of this article incorrectly said that it was the Dow that fell 0.3% and the Nasdaq that fell 0.9%. (Corrected January 14)

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