Jan 14 (Reuters) - The Dow closed lower with a big drag from
financial stocks as investors were disappointed by fourth
quarter results from big U.S. banks, which cast a shadow over
the earnings season kick-off.
The Nasdaq and the S&P regained lost ground in afternoon
trading to close higher. Meanwhile the consumer discretionary
also put pressure on major indexes after morning data
showed a December decline in retail sales and a souring of
JPMorgan Chase & Co tumbled after reporting weaker
performance at its trading arm. The bellwether lender also
warned that soaring inflation, the looming threat of Omicron and
trading revenues would challenge industry growth in coming
Along with JPMorgan, big decliners putting pressure on the
Dow included Goldman Sachs, American Express and
Citigroup Inc shares fell after it reported a 26% drop
in fourth-quarter profit, while asset manager BlackRock Inc
fell after missing quarterly revenue expectations.
The earnings kick-off had investors taking profits in the
S&P 500 bank subsector after it had hit an intraday
high in the previous session. Financial stocks had been
outperforming the S&P recently as investors bet that the Federal
Reserve's expected interest rate hikes will boost bank profits.
"The bar was very high going into (JPMorgan) results. On the
surface it was good but, under the hood, not so much," said
Michael James, managing director of equity trading at Wedbush
Securities in Los Angeles. In the interest rate hiking cycle
expected this year "positioning was very crowded on the long
side" going into the earnings season.
For consumer stock weakness, James pointed to "clearly
disappointing" retail sales, which dropped 1.9% last month due
to shortages of goods and an explosion of COVID-19 infections.
Separate data showed soaring inflation hit U.S.
consumer sentiment in January, pushing it to its second lowest
level in a decade.
Retail sales and bank loan growth raised doubts about the
economic outlook for the current quarter and 2022 for Keith
Buchanan, portfolio manager at Globalt in Atlanta.
"The question is, does the economy have enough strength to
get through the risk Omicron brings as fiscal and monetary
stimulus is rolling off," Buchanan said.
According to preliminary data, the S&P 500 .SPX> gained 2.89
points, or 0.06%, to end at 4,661.92 points, while the Nasdaq
Composite gained 81.98 points, or 0.55%, to 14,889.73.
The Dow Jones Industrial Average fell 208.43 points, or
0.58%, to 35,905.19.
Analysts see S&P 500 companies earnings rising 23.1% in the
fourth quarter, according to IBES data from Refinitiv.
One bright spot in the bank sector on Friday however was
Wells Fargo & Co, which gained ground after posting a
bigger-than-expected rise in fourth-quarter profit.
Casino operators Las Vegas Sands, Melco Resorts
and Wynn Resorts rallied after Macau's
government capped the number of new casino operators allowed to
operate to six for a period of 10 years.
U.S. stock markets will remain shut on Monday for the public
holiday in honor of Martin Luther King.
(Additional reporting by Bansari Mayur Kamdar and Shreyashi
Sanyal in Bengaluru, Sinéad Carew in New York, Editing by Maju
Samuel and Marguerita Choy)