Falling Banks Hold Back S&P 500 as Earnings Season Launches

A sharp drop for bank stocks overshadowed gains elsewhere in the market, and the S&P 500 was close to flat in midday trading Friday as a highly anticipated earnings-reporting season got underway.

Analysts have high expectations for how much corporate earnings grew in the first three months of the year, and they’re forecasting a jump of roughly 17 percent for S&P 500 companies from a year earlier. On Friday, several banks reported profits that topped the high bars set for them, yet their stocks fell anyway because of some concerns that investors saw nestled in their financial reports.

KEEPING SCORE: The S&P 500 fell 1 point, or 0.1 percent, to 2,662, as of 11:30 a.m. Eastern time. The Dow Jones Industrial Average fell 53, or 0.2 percent, to 24,429, and the Nasdaq composite lost 16, or 0.2 percent, to 7,124.

BANK PAIN: Financial stocks in the S&P 500 fell 1.2 percent, by far the worst loss among the 11 sectors that make up the index. The second-biggest loss was just 0.2 percent.

PNC Financial Services Group had the biggest loss in the S&P 500, and it dropped 3.9 percent to $145.77 after reporting first-quarter results that fell short of some analysts’ expectations.

JPMorgan Chase, Citigroup and Wells Fargo all reported profits that beat expectations, but investors nevertheless found some marks against them buried in their reports. Investors had been largely expecting the good news that the banks delivered, such as healthier trading, but they also picked up on an increase in charge-offs for credit cards at JPMorgan Chase, among other things, said Matthew Watson, portfolio manager at James Investment Research.

JPMorgan Chase fell 2.6 percent to $110.46, Citigroup lost 2.6 percent to $70.28 and Wells Fargo fell 3 percent to $51.12.

HIGH EXPECTATIONS: Analysts came into this earnings-reporting season with hopes that the big numbers could prove to be a steadying force for the market. After weeks in which fears about a possible trade war dominated, the hope was that strong profit growth would divert investors’ attention. Over the long term, stock prices tend to track the progress of corporate profits.

But Watson said one danger for the market is how much expectations for profit growth this year have climbed recently, particularly following Washington’s recent overhaul of the tax code. That could set conditions for future disappointment.

“In the near term, it looks like companies are beating expectations in general,” he said. “Our concern comes over the next 12 months.”

ENERGIZED STOCKS: Outside financial stocks, other areas of the market were stronger. Energy stocks in the S&P 500 jumped 1.2 percent after the price of oil continued its rise.

Benchmark U.S. crude oil added 30 cents to $67.37 per barrel and is close to its highest settlement price since 2014. Brent crude, the international standard, rose 50 cents to $72.52.

BROAD SUPPORT: Broadcom rose to one of the biggest gains in the S&P 500 after it said it will repurchase up to $12 billion of its stock. By taking shares off the market, such buybacks can result in higher earnings per share for companies. The technology company rose 3.3 percent to $247.26.

COMMODITIES: Gold rose $6.10 to $1,348.00, silver added 17 cents to $16.64 and copper rose a penny to $3.07 per pound.

YIELDS: The yield on the 10-year Treasury note slipped to 2.82 percent from 2.84 percent late Thursday. The two-year yield edged up to 2.36 percent from 2.35 percent.

CURRENCIES: The dollar rose to 107.50 Japanese yen from 107.23 yen late Thursday. The euro slipped to $1.2327 from $1.2329, and the British pound rose to $1.4258 from $1.4225.

MARKETS ABROAD: In Europe, France’s CAC 40 was virtually flat, and Germany’s DAX gained 0.2 percent. The FTSE 100 in London was steady.

Japan’s Nikkei 225 rose 0.6 percent, South Korea’s Kospi advanced 0.5 percent and Hong Kong’s Hang Seng index edged down 0.1 percent.