U.S. stock markets closed lower on Friday, as earnings results of large banking companies failed to live up to investors high expectations. Also, panic selling took place as news about U.S. airstrike on Syria surfaced. Moreover, investors remain concern about the possibility that Russia's lower house of parliament is considering a draft legislation allowing Kremlin to ban a list of U.S. products. This was in retaliation of recent U.S. sanctions on a group of Russian tycoons and officials.
The Dow Jones Industrial Average (DJI) closed at 24,360.14, declining 0.5% or 122.9 points. The S&P 500 Index (INX) decreased 0.3% to close at 2,656.30. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 7,106.65, decreasing 0.5%. A total of 5.78 billion shares were traded on Friday, lower than the last 20-session average of 7.22 billion shares. Declining issues outnumbered advancers on the NYSE by 1.28-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 1.64-to-1 ratio. The CBOE VIX declined 5.8% and closed at 17.41.
How Did the Benchmarks Perform?
The Dow shed 0.5% with 17 of the blue-chip index’s 30 components closing in the red.
The S&P 500 decreased 0.3% led by 1.5% decline of the Financials Select Sector SPDR (XLF). However, Energy Select Sector SPDR (XLE) gained 1.1%. Seven out of the total 11 sectors of S&P 500 ended in negative territory.
Banking Sector Plummets
The financial sector has weighed down the Wall Street on Friday. Three major banks JPMorgan Chase & Co. JPM, Citigroup Inc. C and Wells Fargo & Co. WFC shed 2.7%, 1.6% and 3.4%, respectively. These banking behemoths lost significantly despite reporting better-than-expected first quarter results.
PMorgan’s first-quarter 2018 earnings of $2.37 per share handily outpaced the Zacks Consensus Estimate of $2.28. Net revenues as reported were $27.9 billion, which topped the Zacks Consensus Estimate of $27.8 billion. (Read More: JPMorgan Q1 Earnings Beat on Better Rates and Trading)
Citigroup’s earnings per share of $1.68 for the quarter easily outpaced the Zacks Consensus Estimate of $1.61.Revenues were up 3% year over year to $18.9 billion in the reported quarter.The revenue figure came in line with the Zacks Consensus Estimate. (Read More: Citigroup Beats on Q1 Earnings, Records High Revenues)
Wells Fargo’s quarterly earnings of $1.12 per share surpassed the Zacks Consensus Estimate of $1.07.The quarter’s total revenues were $21.9 billion, outpacing the Zacks Consensus Estimate of $21.7 billion. However, the company declared that it faces a potential $1 billion in fines to resolve government investigations into the company’s behavior in the auto and mortgage markets. (Read More: Wells Fargo Q1 Earnings Beat, Low Provisions Recorded)
It seems that the investor’s expectation for financial sector has skyrocketed this earnings session where even a strong result failed to excite them. However, investors have expected more from these large banks based on tax cut and interest rate hike. Consequently, the stock price of the banking major plunged. Each of the three stocks carries a Zacks Rank #3 (Hold). You can seethe complete list of today’s Zacks #1 Rank stocks here.
Geopolitical Tension Remains
Possibility of an air strike in Syria resulted in panic selling on Friday. Escalation of war will gave significant negative effect on global economy. Moreover, a possible trade conflict between United States and Russia and further escalation of ongoing trade conflict with China also impacted investor’s sentiment negatively.
The University of Michigan's consumer sentiment index recorded a reading of 97.8 in April. April reading was lower than the March reading of 101.4.
For the week, all the three major benchmarks increased. The Dow, the S&P 500 and the Nasdaq gained 1.8%, 2% and 2.8% respectively. Gains came on the back of strong expectations for Q1 earnings in an otherwise volatile market.
Markets opened higher on Monday and continued its bull run on the next day after trade related tensions with China eased. White House said that trade disputes with China could be eased by holding talks. Further, Chinese President Xi promised to take measures to open the country’s economy and cut import tariffs.
Markets closed lower on Wednesday after two days of gains, following President Donald Trump tweet warning Russia of a possible military strike on Syria. However, the Wall Street rebounded on Thursday as geopolitical tensions eased.
Stocks That Made Headlines
Rite Aid Reports Narrower-Than-Estimated Loss in Q4
Rite Aid Corporation RAD delivered better-than-expected bottom-line results for fourth-quarter fiscal 2018, marking a considerable improvement from its recent trend. (Read More)
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