Stocks Fall as Bank Shares Drop and December Retail Disappoints

Stocks fell, with the three major U.S. indexes poised to close lower for the week, as major banks kicked off the fourth quarter earnings season with mixed results and December retail sales were lower than expected.

Banks and Retail Stocks Fall, Energy Gains

The Dow is down more than 300 points, nearly a full percent, and the S&P 500 is about 0.5% lower. The Nasdaq's earlier gains have reversed and that index is down about 0.2%.

JPMorgan Chase & Co. (JPM) is the worst-performing stock in both the Dow and S&P 500 after reporting a fourth-quarter loss, and net interest margin that came in below analysts' consensus estimates. Shares of Citigroup Inc. (C) are lower as well on its earnings news, and rival banks The Goldman Sachs Group, Inc. (GS) and Morgan Stanley (MS) are also dropping. Wells Fargo & Company (WFC) shares are rising after it reported fourth-quarter revenue that topped Wall Street estimates.

Shares of The Home Depot, Inc. (HD) and other retailers are declining following the retail sales report. The Census Bureau said food and retail sales sank 1.9% in December, in the biggest drop in 10 months. Economists had forecast a smaller decline of 0.1%. Excluding autos, sales fell 2.3% from November, compared to projections of a 0.1% gain.

The Walt Disney Company (DIS) shares are falling on an analyst downgrade. Energy company stocks are jumping as oil rose above $83 per barrel for the first time since early November. Shares of casino companies are higher.

Most major cryptocurrencies are trading lower, but the price of Dogecoin is soaring after Tesla CEO Elon Musk said the Shiba Inu-faced coin could be used to buy some of the carmaker’s merchandise. 

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Chart of the Day: Retail Retreat

Rising prices and the spread of the omicron variant of COVID-19 led to a bigger-than-expected drop in U.S. retail sales in December.

The Census Bureau reported retail sales fell 1.9% from the month before, well below economists' forecasts of a 0.1% decline and the largest decrease in 10 months. Leaving out motor vehicles and parts, the drop was 2.3%, also greater than anticipated. In addition, November’s increase was lowered to 0.2% from 0.3%.

Consumers pulled back on purchases as inflation rose to an almost four-decade high, and many businesses had to close or reduce hours because of staffing shortages caused by the virus. 

Ten of the 13 retail categories analyzed by the Census Bureau fell, led by an 8.7% slide in sales at non-store retailers, which includes e-commerce. Department store sales sank 7%. Sales at restaurants and bars were 0.8% lower.  

The sectors that registered increases were dealers of building materials, garden equipment, and supplies, as well as health and personal care stores, and miscellaneous store retailers.

Stock of the Day: JPMorgan Chase (JPM)

JPMorgan Chase is warning that higher costs and moderating revenue will negatively affect the company's financial results in the near term. Its shares dropped more than 6% today, following a 13% gain in the past year.

CFO Jeremy Barnum said over the next year or two, the largest U.S. bank by market capitalization expects to earn modestly less than the target as "headwinds likely exceed tailwinds." He pointed to inflationary pressures and the cost of investments that will increase the company's expenses to $77 billion in 2022. 

Barnum's comments came after JPMorgan Chase reported fourth quarter revenue of $29.3 billion, down slightly from last year. Earnings per share (EPS) were $3.33, better than analysts' forecasts. However, the bank took a $1.8 billion net benefit from releasing reserves for loan losses that never materialized. Without that, the EPS would have come in at $2.86. In addition, the firm had a 16% decline in fixed-income trading revenue, short of forecasts.