NEW YORK (AP) โ U.S. stocks are sinking Friday after a mixed start of earnings reporting season. Concerns about tensions in the Middle East are also driving up oil and gold prices, while Treasury yields are falling as investors look for safer places for their money.
The S&P 500 was down 0.9% in midday trading and was headed for its worst weekly loss since the beginning of the year. The Dow Jones Industrial Average was down 305 points, or 0.8%, as of 11:45 a.m. ET, and the Nasdaq composite was down 1.1%.
JPMorgan Chase fell 5.3% despite reporting higher profits for the first three months of the year than analysts expected. The nation's largest bank gave a forecast for a key source of revenue this year that fell below Wall Street's estimate.
The pressure is always on companies to produce greater profits. But it's particularly acute now, given concerns that the other main lever setting stock prices, interest rates, may not offer much momentum in the near term.
TO stream of reports this year has shown both inflation and the general economy stay warmer than expected. Fears that inflation will remain stubbornly high have forced traders to sharply reduce forecasts for how many times the Federal Reserve can cut its main interest rate this year. Traders are betting heavily on just two, according to CME Group data, below forecasts for at least six at the beginning of the year.
Stock prices had already hit records in part because of expectations of such cuts. Without lower interest rates, companies will need to produce higher profits to justify their stock prices, which critics say are already too expensive by many measures.
This year's jump in oil prices has further raised concerns because it could increase pressure on inflation. They rose again on Friday as tensions continue to roil the Middle East. Israel has said could attack Iran if it launched an attack from its territory after the assassination of Iranian generals in a Explosion at the Iranian consulate in Syria.
A barrel of benchmark U.S. crude gained 1.6% to $86.36 after rising about twice as much. Brent crude, the international standard, rose 1.5% to $91.96 and is back to roughly where it was in October.
At the same time, Treasury yields in the bond market sank and the price of gold rose, which is typical when investors focus on investments considered safer.
The 10-year Treasury yield fell to 4.51% from 4.58%. Gold, which has been setting records, rose 1.8% to $2,414.70 an ounce after paring earlier gains.
Adding to the jitters was a preliminary report suggesting confidence among American consumers is sinking. It's an important update because American consumer spending is the main driver of the economy.
Perhaps most worrying was that American consumers are becoming more pessimistic about inflation. Its inflation forecasts for the next 12 months reached the highest level since December. Such expectations could trigger a self-fulfilling prophecy, in which purchases aimed at getting ahead of higher prices only inflame inflation further.
That's why so much scrutiny is paid to corporate profits. While the downside to a remarkably resilient U.S. economy is a lower chance of rate cuts, the upside is that it should help shore up business sales and profits.
That helped earnings growth spread to more types of companies, rather than just the Big Tech giants that dominated the market last year, according to David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.
Therefore, he predicts that the S&P 500 could end the year around the 5,200 level, roughly where it closed on Thursday. He says the index could perhaps even rise to 5,500 if inflationary pressures decline more quickly or corporate earnings growth is stronger than expected.
On Wall Street, Wells Fargo fell 0.4% after swinging between gains and losses. It beat analysts' profit targets for the latest quarter in its first report since the Biden administration eased some of the restrictions on the bank after a series of scandals.
Citigroup fell 2.7% despite also reporting better-than-expected results, while State Street rose 1%.
Banks are entering a reporting season in which analysts predict that S&P 500 companies will generate a third consecutive quarter of growth, according to FactSet.
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AP writers Matt Ott and Zimo Zhong contributed.
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