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Wall Street falls to its worst week in months as oil jumps

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 profits reporting 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 1.5% in afternoon trading and headed for its worst weekly loss so far this year. The Dow Jones Industrial Average was down 505 points, or 1.3%, as of 1:10 p.m. Eastern Time, and the Nasdaq Composite Index was down 1.6%.

JPMorgan Chase fell 5.8% despite profit for the first three months of the year being 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.

A flow of reports this year showed both inflation and the whole economy remain warmer than expected. Fears that inflation will remain stubbornly high have forced traders to lower their forecasts for how many times the Federal Reserve might intervene. lowered its main interest rate This year. Traders are largely betting on just two, CME Group data shows, down from forecasts of at least six at the beginning 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.

Rising oil prices this year have further heightened concerns as they could increase pressure on inflation. They increased further on Friday as tensions continue to rage in the Middle East. Israel said this could hit Iran if he launched an attack from his territory following the killings of Iranian generals in a explosion at Iranian consulate in Syria.

A barrel of benchmark US crude gained 1% to $85.81 after rising more than double that figure. Brent crude, the international standard, rose 1% to $91.58 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 4.50% from 4.58%. Record-setting gold rose 0.6% to $2,387.30 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 0.2% 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 0.6% although it also reported better-than-expected results, while State Street rose 0.1%.

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.

___

AP writers Matt Ott and Zimo Zhong contributed.

American flags hang in front of the New York Stock Exchange, right, Thursday, April 11, 2024 in New York.  Stocks in Europe and Asia are mostly lower after U.S. stocks fell following a new release of higher-than-expected inflation data.  (AP Photo/Peter Morgan)

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A currency trader looks at monitors near the screen showing the Korea Composite Stock Price Index (KOSPI), left, and the exchange rate between the U.S. dollar and the South Korean won on the trading floor exchange office at KEB Hana Bank headquarters in Seoul, South Korea.  , Friday, April 12, 2024. Asian stocks were mostly lower Friday after gains in big tech stocks helped U.S. stock indexes recover much of their decline from the day before.  (AP Photo/Ahn Young-joon)

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Credit: AP

Foreign exchange traders work near the screen displaying the Korea Composite Stock Price Index (KOSPI) in the foreign exchange trading floor of KEB Hana Bank headquarters in Seoul, South Korea, Friday, April 12 2024. Asian stocks were mostly lower Friday after gains Shares of big tech companies helped U.S. stock indexes recover much of their decline from the day before.  (AP Photo/Ahn Young-joon)

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Credit: AP

A foreign exchange trader walks past the screen displaying the Korea Composite Stock Price Index (KOSPI), left, and the exchange rate between the U.S. dollar and the South Korean won in the foreign exchange trading floor of the headquarters of KEB Hana Bank in Seoul, South Korea, Friday, April 12, 2024. Asian stocks were mostly lower on Friday after gains in big tech stocks helped U.S. stock indexes recover much of their their decline from the day before.  (AP Photo/Ahn Young-joon)

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Credit: AP

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