Closing Market Update

The Dow Jones Industrial Average dropped to its lowest level since January after JPMorgan Chase results disappointed and Middle East tensions escalated.

Published as of: April 12, 2024, 4:45 p.m. ET 

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(Friday market close) The Dow Jones Industrial Average® ($DJI) tumbled Friday to its lowest level since late January as concerns over the Middle East conflict flared and disappointing quarterly results from JPMorgan Chase (JPM) and other big banks fueled a sell-off in financial shares. The S&P 500® index (SPX) ended at a four-week low.

JPMorgan Chase shares plunged more than 6%, leading the Dow decliners, after the bank's 2024 outlook for net interest income fell short of expectations, overshadowing stronger-than-expected first-quarter earnings. The bank's CEO, Jamie Dimon, also expressed concern over inflation and "unsettling" geopolitics. Citigroup (C) and Wells Fargo (WFC) also fell after both banks reported results earlier in the day.

WTI Crude Oil (/CL) futures earlier Friday spiked to a five-month high above $87 per barrel after The Wall Street Journal reported Israel is preparing for a direct attack from Iran as soon as Friday or Saturday. 

"Many economic indicators continue to be favorable," Dimon said in his company's earnings statement. "However, looking ahead, we remain alert to a number of significant uncertain forces. First, the global landscape is unsettling…and geopolitical tensions are growing. Second, there seems to be a large number of persistent inflationary pressures, which may likely continue."

Here's where the major benchmarks ended:

  • The S&P 500 index fell 75.65 points (1.5%) to 5,123.41, down 1.6% for the week; the Dow Jones Industrial Average lost 475.84 points (1.2%) to 37,983.24, down 2.4% for the week; the Nasdaq Composite® ($COMP) dropped 267.10 points (1.6%) to 16,175.09, down 0.5% for the week.
  • The 10-year Treasury note yield (TNX) fell more than 5 basis points to 4.52%, still up about 12 basis points for the week.
  • The Cboe Volatility Index® (VIX) rose 2.38 to 17.30.

Semiconductor shares were also among the weakest performers Friday as chipmakers reversed Thursday's sharp gains. The Philadelphia Semiconductor Index (SOX) dropped more than 3% and ended with its third straight weekly decline. Energy companies were also under pressure after crude oil prices retreated from the morning rally. Oil futures are still up 20% this year. The small-cap Russell 2000® Index (RUT) lost 1.9% and posted a 2.9% drop for the week.

In other markets, the U.S. dollar index (DXY) strengthened to a five-month high and gained 1.7% this week, reflecting beliefs the hotter-than-expected inflation readings earlier this week will keep interest rates elevated. Volatility based on the VIX jumped to its highest level since late October.

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Stocks on the move

The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:

  • Arista Networks (ANET) tumbled 8.6% after Rosenblatt Securities downgraded the stock to "sell" from "buy," saying the cloud network company may not benefit from AI as much as some think.
  • BlackRock (BLK) lost 2.9% after the asset manager's higher-than-expected first-quarter earnings were overshadowed by weaker-than-expected net inflows.
  • Citigroup sank 1.7% despite reporting first-quarter earnings of $1.86 per share, more than 60 cents above forecasts, and a 35% surge in investment banking revenue.
  • Corteva (CTVA) fell 4.8% after JPMorgan downgraded the seed and agricultural chemical producer to "neutral" from "overweight," citing declining prices and slower demand.
  • V.F. Corp. (VFC) dropped 7.8% after BNP Paribas Exane downgraded the apparel company to "neutral" from "outperform" and cut its price target, citing expectations for lower guidance from the company.
  • Wells Fargo shed 0.4% after the bank reported better-than-expected first-quarter earnings but also a drop in net interest income. 

Major bank earnings continue next week with Dow member Goldman Sachs (GS) expected to report results Monday. Bank of America (BAC) and Morgan Stanley (MS) are expected to report earnings Tuesday, along with Johnson & Johnson (JNJ) and UnitedHealth (UNH).

For banks, net interest income has come under sharp scrutiny recently as expectations over the outlook for Federal Reserve rate policy shifted in recent months. Many banks benefited over the last year from strong net interest income, which is the money banks make lending minus what they pay to customers. But if the Fed keeps rates historically high in its efforts to bring inflation down, banks may have to pay more to clients to keep money in their accounts.

Inflation trend remains choppy

Friday's session capped a rocky week for investors, who've grown increasingly unnerved by a pickup in inflation early this year. The March Consumer Price Index (CPI), reported Wednesday, surpassed analysts' estimates for the third month in a row. 

The March Producer Price Index (PPI), released Thursday, was slightly tamer. But the recent inflation numbers, combined with continued strong job growth, likely will delay any Fed rate cuts until the second half of the year, assuming the central bank cuts rates at all, analysts said. 

"This week's inflation data confirmed that the disinflation process continues to be choppy, and at least for consumer prices, the January and February blips were not just due to seasonal effects," said Kevin Gordon, director and senior investment strategist at Schwab. 

CPI and PPI numbers "simply reinforce the fact that the Fed won't have confidence in the near term that inflation is getting back to its 2% long-term target," Gordon added. "This probably pushes out the first rate cut, but the timing of the first cut is not what matters. The economic conditions surrounding the first cut are much more important."

Late Friday, traders priced 96% odds the fed funds target will remain unchanged at 5.25% to 5.5% following the Federal Open Market Committee's (FOMC) meeting April 30 – May 1, according to the CME FedWatch Tool. The tool shows a 26% chance of a quarter-point cut following the FOMC's June 11 – 12 meeting, down from 51% a week ago.

Economic news Friday underscored heightened inflation concerns. The University of Michigan's initial Index of Consumer Sentiment for April fell to 77.9 from 79.4 in March, a larger-than-expected decline.

According to Joanne Hsu, director of the university's survey, consumers appear to perceive little change in the state of the economy since the start of the year. Expectations for personal finances, business conditions, and the labor market have been stable for the last four months, she said in a statement. 

"However, a slight uptick in inflation expectations in April reflects some frustration that the inflation slowdown may have stalled," Hsu explained.