A sharp drop for bank stocks overshadowed gains elsewhere in the market, and the S&P 500 dipped in early afternoon trading on Friday as a highly anticipated earnings reporting season got underway.
Analysts have high expectations for how much corporate earnings grew in the first three months of the year, and the hope is that the coming barrage of profit reports will provide a steadying force for the market following its shaky run in recent weeks. Wall Street came into this reporting season forecasting the strongest profit growth in seven years for S&P 500 companies.
On Friday, several banks reported first-quarter profits that topped the high bars set for them, yet their stocks fell anyway because of some concerns that investors saw nestled in their financial reports.
KEEPING SCORE: The S&P 500 fell 4 points, or 0.2 percent, to 2,659, as of 12:40 p.m. Eastern time. The Dow Jones industrial average fell 79, or 0.3 percent, to 24,404, and the Nasdaq composite lost 19, or 0.3 percent, to 7,121.
BANK PAIN: Financial stocks in the S&P 500 fell 1.5 percent, by far the worst loss among the 11 sectors that make up the index. The second-biggest loss was just 0.3 percent.
PNC Financial Services Group had one of the biggest losses in the S&P 500, and it dropped 3.4 percent to $146.57 after reporting first-quarter results that fell short of some analysts’ expectations.
JPMorgan Chase, Citigroup and Wells Fargo all reported profits that beat expectations, but investors nevertheless found some marks against them buried in their reports. Investors had been largely expecting the good news that the banks delivered, such as healthier trading, but they also picked up on an increase in charge-offs for credit cards at JPMorgan Chase, among other things, said Matthew Watson, portfolio manager at James Investment Research. At Wells Fargo, the possibility of a big settlement with federal regulators hung over the results.
JPMorgan Chase fell 3 percent to $109.99, Citigroup lost 2.5 percent to $70.33 and Wells Fargo fell 3.2 percent to $50.99.
HIGH EXPECTATIONS: After weeks where fears about a possible trade war dominated the market, the hope was that strong profit growth would divert investors’ attention. Over the long term, stock prices tend to track the progress of corporate profits.
But Watson said one danger for the market is how much expectations for profit growth this year have climbed, particularly following Washington’s recent overhaul of the tax code. That could set conditions for future disappointment.
“In the near term, it looks like companies are beating expectations in general,” he said. “Our concern comes over the next 12 months.”
ENERGIZED STOCKS: Outside financial stocks, other areas of the market were stronger. Energy stocks in the S&P 500 jumped 1 percent after the price of oil continued its rise.
Benchmark U.S. crude oil added 44 cents to $67.51 per barrel and is close to its highest settlement price since 2014. Brent crude, the international standard, rose 70 cents to $72.72.
TAKING OFF: Alaska Air Group jumped to the biggest gain in the S&P 500 after it gave an updated forecast for first-quarter revenue trends that was better than what it had previously given. Shares jumped 6.6 percent to $64.22.
Airline stocks have been strong in recent days after Delta Air Lines reported stronger-than-expected earnings on Thursday. Delta’s shares are up 2.8 percent in the last two days.
BROAD SUPPORT: Broadcom rose to one of the biggest gains in the S&P 500 after it said it will repurchase up to $12 billion of its stock. By taking shares off the market, such buybacks can result in higher earnings per share for companies. The technology company rose 4 percent to $248.91.
COMMODITIES: Gold rose $7.20 to $1,349.10, silver added 20 cents to $16.67 and copper rose a penny to $3.07 per pound.
YIELDS: The yield on the 10-year Treasury note slipped to 2.82 percent from 2.84 percent late Thursday. The two-year yield edged up to 2.36 percent from 2.35 percent, and the 30-year yield ticked fell to 3.03 percent from 3.05 percent.
CURRENCIES: The dollar rose to 107.41 Japanese yen from 107.23 yen late Thursday. The euro rose to $1.2336 from $1.2329, and the British pound rose to $1.4257 from $1.4225.
MARKETS ABROAD: In Europe, France’s CAC 40 edged up 0.1 percent, and Germany’s DAX gained 0.2 percent. The FTSE 100 in London rose 0.1 percent.
Japan’s Nikkei 225 rose 0.5 percent, South Korea’s Kospi advanced 0.5 percent and Hong Kong’s Hang Seng index edged down 0.1 percent.
AP Business Writer Youkyung Lee contributed from Seoul, South Korea.