Stock market today: Wall Street falls to its worst week in months as oil jumps

NEW YORK (AP) U.S. stocks fell Friday after a mixed start to the earnings season. Concerns over tensions in the Middle East are also driving up oil and gold prices, while Treasury yields are falling as investors look for safer places to put their money.

The S&P 500 was down 0.9% at midday and headed for its worst weekly loss so far this year. The Dow Jones Industrial Average was down 305 points, or 0.8%, as of 11:45 a.m. Eastern Time, and the Nasdaq Composite Index was down 1.1%.

JPMorgan Chase fell 5.3% despite a profit for the first three months of the year that was higher than analysts expected. The nation's largest bank gave a forecast for a key revenue stream this year that fell below Wall Street's estimate.

There is always pressure on companies to generate greater profits. But it's particularly acute today given concerns that the other main lever that sets stock prices, interest rates, doesn't offer much short-term effect.

This year, numerous reports have shown that inflation and the economy as a whole remain higher than expected. Fears that inflation will remain stubbornly high have forced traders to lower their forecasts for how many times the Federal Reserve might cut its main interest rate this year. Traders are largely betting on just two, according to CME Group data, down from forecasts of at least six at the start of the year.

Stock prices had already hit record highs, partly due to expectations of such declines. Without more favorable interest rates, companies will have to generate higher profits to justify their stock prices, which critics say are already too expensive by various measures.

This year's rise in oil prices has further heightened concerns as it could increase pressure on inflation. They increased further on Friday as tensions continue to rage in the Middle East. Israel has said it could strike Iran if it launches an attack from its territory following the deaths of Iranian generals in an explosion at the Iranian consulate in Syria.

A barrel of benchmark U.S. crude gained 1.6% to $86.36, having risen about twice as much previously. Brent crude, the international standard, rose 1.5% to $91.96 and returned to roughly its October level.

At the same time, Treasury yields in the bond market have fallen and the price of gold has risen, typical when investors focus on investments considered safer.

The 10-year Treasury yield fell to 4.51% from 4.58%. Record-setting gold rose 1.8 percent to $2,414.70 an ounce after paring earlier gains.

Adding to this nervousness is a preliminary report suggesting that American consumer confidence is collapsing. This is an important update because U.S. consumer spending is the main driver of the economy.

Perhaps most worrying is that American consumers are becoming more pessimistic about inflation. Their inflation forecasts for the next 12 months rose to their highest level since December. Such expectations could trigger a self-fulfilling prophecy, in which purchases intended to anticipate rising prices would only further inflame inflation.

This is why corporate profits are subject to such scrutiny. While the downside of a remarkably resilient U.S. economy is a diminishing chance of interest rate cuts, the upside is that this should help support corporate sales and profits.

This has allowed earnings growth to spread across more types of companies, rather than just the tech giants that dominated the market last year, according to David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.

For this reason, he predicts that the S&P 500 could end the year around the 5,200 level, roughly where it closed on Thursday. He said the index could even reach 5,500 if inflationary pressures ease more quickly or if corporate profit growth is stronger than expected.

On Wall Street, Wells Fargo fell 0.4% after oscillating between gains and losses. It beat analysts' profit targets for the latest quarter in its first report since the Biden administration eased some restrictions on the bank after a series of scandals.

Citigroup fell 2.7% despite also reporting better-than-expected results, while State Street climbed 1%.

Banks are entering a reporting season in which analysts predict S&P 500 companies will achieve a third straight quarter of growth, according to FactSet.

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AP writers Matt Ott and Zimo Zhong contributed.