U.S. stock indexes fell on Friday as mixed economic data added to worries that the Federal Reserve will not pause its interest rate hikes soon, while upbeat earnings helped the banking sector emerge as a rare bright spot.
JPMorgan’s shares rallied 7.3%, set for its steepest one-day gain in over two years, while Citigroup rose 3.8%. The S&P 500 Banks index (.SPXBK) rose 3.3% to a one-month high, among the few sectors to outperform.
“In terms of the actual headline announcement, the earnings picture looks pretty good … some of it was boosted by the flight of deposits to large banks from the small- and mid-sized banks,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
“That big surge in deposits went a long way in boosting net interest income margins that otherwise might not see the same boost on a regular basis.”
The broader market came under pressure as investors fretted over the prospect of interest rates staying higher for longer as data this week signaled a slowing U.S. economy, but not weak enough to push the Fed off its course.
A drop in retail sales for the second straight month suggested that the economy was losing steam, while industrial production increased by 0.4% in March, double the rate economists had predicted.
Meanwhile, the University of Michigan’s preliminary April reading showed households expected inflation to rise over the next 12 months.
Traders largely stuck to bets that the Fed will raise rates by another 25 basis points in May.
Mixed views from Fed officials also weighed on the mood.
Atlanta Fed President Raphael Bostic said another 25-bps rate hike can allow the Fed to end its tightening cycle, while Chicago Fed President Austan Goolsbee urged the central bank to be prudent on policy with recession now being certainly feasible.
At 11:58 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 192.86 points, or 0.57%, at 33,836.83, the S&P 500 (.SPX) was down 17.53 points, or 0.42%, at 4,128.69, and the Nasdaq Composite (.IXIC) was down 86.12 points, or 0.71%, at 12,080.15.
Declining issues outnumbered advancers for a 2.59-to-1 ratio on the NYSE and a 2.42-to-1 ratio on the Nasdaq.
The S&P index recorded nine new 52-week highs and two new lows, while the Nasdaq recorded 34 new highs and 134 new lows.