Stock market today: Wall Street falls sharply to close its worst week since October

NEW YORK — US stocks fell on Friday after a mixed start to the reporting season. Concerns about a possible escalation of tensions in the Middle East have roiled financial markets, prompting investors to look for safer places to park their money.

THE&The P 500 fell 1.5% to cap its worst week since October, when a huge rally on Wall Street began. The Dow Jones Industrial Average fell 475 points, or 1.2%, and the Nasdaq composite fell 1.6% from its record set the day before.

JPMorgan Chase was one of the market's heaviest weights and fell 6.5% despite profit for the first three months of the year being higher than analysts expected. The nation's largest bank gave a forecast for this year for a key source of revenue that fell below Wall Street's estimate, calling for only modest growth.

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. That forced traders to lower their forecasts for how many times the Federal Reserve could cut its main interest rate this year. Traders are largely betting on just two cuts, according to CME Group data, down from forecasts of at least six at the start of the year.

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

Rising oil prices this year have further increased fears of upward pressure on inflation. Oil rose further on Friday as tensions continue to roil 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.

Brent crude, the international standard, rose 0.8 percent to settle at $90.45 a barrel. It briefly topped $92 during the day and returned to roughly where it was in October.

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% Thursday evening. Gold, which set records, approached $2,450 an ounce for the first time before paring its gain.

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 even more worrying is that American consumers may become 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 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 a rate cut, the upside is that it 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 it provides the S&The P 500 could end the year around the 5,200 level, which is 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 slipped 0.4% after swinging between gains and losses throughout the day. It beat analysts' forecasts for overall earnings for the latest quarter. But its net interest income, a key component of banks' profits, fell short of forecasts.

Citigroup fell 1.7% although it also reported better-than-expected results, while State Street rose 2.5%.

All things considered, the S&The P 500 fell 75.65 points to 5,123.41. The Dow Jones Industrial Average fell 475.84 to 37,983.24, and the Nasdaq composite fell 267.10 to 16,175.09.

Banks begin reporting season in which analysts forecast companies in the S&The P 500 will generate a third consecutive quarter of growth, according to FactSet. Next week we'll feature reports from big names like Bank of America, Johnson & Johnson and UnitedHealth Group.

Federal Reserve Chairman Jerome Powell will speak at a closely watched Q meeting.&An event Tuesday with a governor of the Bank of Canada. Other Fed officials will also make remarks during the week that could influence traders' expectations about future interest rate movements and trigger Wall Street's next swings.

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AP writers Matt Ott and Zimo Zhong contributed.