Wall Street on Friday is giving back some of the gains from its strong start to the year, as earnings reporting season gets underway and CEOs show just how badly high inflation and a slowing economy are hurting them.
The S&P 500 was 0.7% lower in early trading and on pace for its first loss in four days. The Dow Jones Industrial Average was down 213 points, or 0.6%, at 33,976, as of 9:37 a.m. Eastern time, and the Nasdaq composite was 0.6% lower.
All the indexes are still on track to hold onto gains for the week and for 2023 so far. This year has begun on Wall Street with optimism that cooling inflation across the country could get the Federal Reserve to ease off soon on its sharp hikes to interest rates. Such increases can drive down inflation, but they do so by slowing the economy and risk causing a recession. They also hurt investment prices.
Slowing chunks of the economy and still-high inflation are dragging on profits for companies, which are one of the main levers that set stock prices. Stocks of banks and other financial companies were helping to lead Wall Street lower Friday after several of the industry’s biggest names reported their results for the last three months of the year.
Wells Fargo dropped 3.6% after reporting weaker revenue than analysts expected. JPMorgan Chase slipped 1.2% despite reporting stronger-than-expected profit and revenue. Some investors may have been disappointed in its forecast for some key results in the first three months of this year.
Delta Air Lines sank 6.3% after it gave a forecast that also landed with a thud. Despite reporting stronger results for the end of 2022 than expected, its forecast for profits this quarter fell short of analysts’ expectations.
Treasury yields were holding relatively steady but could be set for bigger swings later in the morning. A report is set to arrive soon showing how much inflation U.S. households are bracing for in coming years.
The Federal Reserve has been intent on that number staying low. Otherwise, it could cause a vicious cycle that only worsen inflation. Consumers could start accelerating their purchases in hopes of getting ahead of higher prices, for example, which would only push prices higher.
The yield on the 10-year Treasury dipped to 3.43% from 3.45% late Thursday. The two-year yield, which tends to move more on expectations for the Fed, slipped to 4.13% from 4.15%.