Stocks Slip Triple Digits on Friday
Stocks slipped Friday, one day after closing at multi-month highs, as investors welcomed better-than-expected profit reports from JPMorgan Chase and Intel, but opted to sell shares regardless.
A mild reading on inflation, a mostly in-line reading on manufacturing and a better-than-expected report on consumer sentiment were also in the mix.
Stocks managed gains Thursday, with the Dow and the S&P 500 closing at the highest point since Oct. 1, 2008, and the Nasdaq ending at the highest point since Sept. 3, 2008.
But gains so far this year have been slow, following last year’s big runup, when the Dow gained 19%, The S&P 500 gained 23% and the Nasdaq gained 44%. Stocks are likely to drift as investors wait for more fourth-quarter profit and economic reports.
Investors were also focusing on some of the negatives in JPMorgan and Intel’s otherwise positive quarterly results, said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.
“JPMorgan had incredible earnings, but their credit card writeoffs were bigger than what people were expecting and moving in the wrong direction,” said Rovelli. “That’s making people nervous.”
He said that with unemployment a constant for now and the Fed at some point this year likely to start raising rates, investors are wondering if the credit losses are going to get worse heading forward. The broad bank sector tumbled, with the KBW Bank (BKX) index falling 2.2%.
Results: JPMorgan Chase reported a better-than-expected quarterly profit of $3.3 billion Friday morning, trouncing estimates, as the financial behemoth moved closer toward making a full recovery from last year’s credit crisis.
But revenue missed forecasts. JPMorgan (JPM, Fortune 500) also reported big losses on credit card and mortgage loans, concerning investors who were looking for signs that credit is improving. The company also added $1.9 billion to its consumer loan loss reserves.
JPMorgan shares fell 2%.
Both earnings and sales beat estimates and marked a sharp improvement from the previous year. But shares slipped 3% in Friday trading.
Economy: The University of Michigan’s consumer sentiment index rose to 72.8 in January from 72.5 in December. Economists surveyed by Briefing.com thought it would rise to 74.
The Consumer Price index, a key measure of inflation, rose 0.1% in December versus forecasts for a rise of 0.2%. CPI rose 0.4% in the previous month. The so-called core CPI, which strips out volatile food and energy prices, rose 0.1%, meeting estimates. Core CPI was flat in the previous month.
Another report, the Empire Manufacturing index, showed manufacturing activity in the New York area bounced back in December, rising to 15.9 from a revised 4.5 in the previous month. Economists thought it would climb to 12.
World markets: Asian markets ended lower, with the exception of the Nikkei, which gained. European markets tumbled.
Commodities and the dollar: The dollar gained versus the euro and fell versus the yen.
COMEX gold for February delivery fell $12.50 to settle at $1,130.50 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.
U.S. light crude oil for February delivery fell $1.39 to settle at $78 a barrel on the New York Mercantile Exchange.
Bonds: Treasury prices rallied in a classic bid-to-quality play, lowering the yield on the 10-year note to 3.67% from 3.73% late Thursday. Treasury prices and yields move in opposite directions.
Market breadth was negative. On the New York Stock Exchange, losers topped winners by over two to one on volume of 1.41 billion shares. On the Nasdaq, decliners beat advancers nearly three to one on volume of 2.69 billion shares.