Stocks started the day modestly higher after several big banks, including JPMorgan Chase (JPM) and Citigroup (C), kicked off first-quarter earnings season on a high note. However, the major indexes quickly turned lower after one Fed official suggested the central bank has more work to do to bring down inflation.
The selling pressure continued throughout the session, though all three main benchmarks managed to hang on to weekly gains.
JPMorgan and Citigroup were among a handful of big banks that reported Q1 earnings this morning. The financial sector, while always important, is even more so right now following last month's failure of several regional banks.
But the turmoil didn't seem to impact JPM, which saw first-quarter earnings surge 56% year-over-year to $4.10 per share and revenue jump 25% to a record $38.4 billion. Net interest income – a key metric for banks that measures what they make on loans minus what they pay depositors – was up 49%. Citigroup, for its part, reported steady top- and bottom-line growth for the quarter as higher interest rates fueled an 18% year-over-year jump in personal banking revenue. JPM stock spiked 7.5% today, while C added 4.8%.
"Big banks are largely immune to the issues that drove Silicon Valley Bank and Signature Bank into the columbarium of failed financial institutions," says José Torres, senior economist at Interactive Brokers. "Unlike regional banks [which appear on next week's earnings calendar], the money centers have low costs of funds, especially with the recent failures of smaller banks causing investors to flock to the safety of the biggest financial companies."
Wall Street's positive mood quickly soured after Federal Reserve Governor Christopher Waller said during a speech in San Antonio, Texas, that the central bank must keep raising rates because of stubbornly high inflation and a tight labor market.
Still, signs continue to show that the Fed's efforts to rein in inflation by slowing the economy are indeed working. The Commerce Department earlier said retail sales in March slumped 1% month-over-month, the biggest decline since November, due largely to falling gas prices and auto sales.
Also on the economic front, preliminary data from the University of Michigan showed that while consumer sentiment is up from March (to 63.5 from 62.0), near-term inflation expectations are also on the rise (to 4.6% from 3.6% last month). Longer term inflation expectations remain steady, though.
At the close, the Nasdaq Composite was down 0.4% at 12,123, the S&P 500 was off 0.2% at 4,137, and the Dow Jones Industrial Average was 0.4% lower at 33,886.
Earnings, Tax Day on deck
With the Fed meeting still a couple weeks out and a relatively light economic calendar on tap, all eyes will be on corporate earnings next week. But there's another important event investors should be aware of: Tax Day. While the official deadline to file taxes is Tuesday, April 18, some folks, including taxpayers impacted by severe storms, have extra time. If you need a tax extension, make sure to check out Kiplinger's guidance on how to get more time to file your federal tax return.
Investors will also want to review this year's capital gains tax rates, which apply to profits made from the sale of stocks, mutual funds and other assets. If you're looking for ways to reduce investment taxes, these five strategies could help.
