US stocks weakened today. Major US banks earlier reported mixed results. The market mood was further determined by US inflation and geopolitical tensions. All three major stock indices wrote off over one percent and ended in losses for the week.
Index
The Dow Jones index, which includes shares of thirty leading US companies, lost 1.24 per cent today to end trading at 37,983.24 points. The broader S&P 500 index shed 1.46 per cent to 5,123.41 points and the Nasdaq Composite index, which includes many companies in the high-tech sector, fell 1.62 per cent to 16,175.09 points.
The S&P 500 index fell 1.56 percent for the week and had its deepest percentage drop for the day since late January. For the week, the percentage decline was the largest since last October.
“If you look at what’s happened in the macroeconomic space, inflation has taken a turn for the worse, which has increased the pressure on companies to do better this earnings season,” said analyst Mike Dickson of Horizon Investments. “Everybody is a little nervous and intensely focused on how good earnings have to be,” he added.
JPMorgan Chase, the largest U.S. bank by assets, posted a 6 percent rise in profit, but its estimate for net interest income fell short of expectations. Its shares fell 6.5 percent after the report. Wells Fargo shares wrote off 0.4 per cent after the firm reported a seven per cent drop in profit for the first quarter. The bank’s net interest income fell due to weak loan demand. Citigroup posted a loss due to employee severance costs and deposit insurance. Citigroup’s shares have written down 1.7 per cent today.
Inflation
Economic data this week, particularly Wednesday’s worse-than-expected U.S. inflation report for March, suggested that inflation could be more persistent than previously thought. This prompted investors to change their expectations regarding the timing and extent of this year’s rate cuts by the US Federal Reserve (Fed).
“There is a real risk that we won’t see any rate cuts this year,” Dickson said. He added that although he does not expect a rate hike, he said the Fed would probably prefer to keep rates at a higher level for a longer period of time.
Geopolitical tensions continue to mount. Iran has threatened to retaliate against Israel for the April 1 raid on its embassy in Damascus, compounding today’s sell-off.
source: ČTK
