Stocks Rebound as Bank Results Disappoint, Earnings Season Kicks Off

Stocks retreated on Friday afternoon, erasing earlier gains as disappointing bank results dampened hopes for a strong quarterly earnings season. The Dow Jones Industrial Average shed 0.5%, or nearly 200 points, while the S&P 500 slipped 0.1% and the Nasdaq Composite dropped close to 0.2%.

Major Wall Street lenders kicked off the fourth quarter earnings season, which was seen as a crucial opportunity for stocks to recover from the losses experienced so far this year. JPMorgan Chase, Bank of America, and Wells Fargo all reported decent results on Friday. However, shares of Bank of America and Wells Fargo fell as they failed to alleviate concerns about potential future challenges.

Airline stocks took a hit at the end of the week, with United Airlines falling by over 9% and American Airlines and Delta decreasing by more than 8%. Delta had reported earnings earlier in the day, beating estimates for revenue and profit but trimming its 2024 earnings forecast. On the other hand, social media company Meta saw a remarkable turnaround, climbing back from a significant drop in stock price in 2022 and reaching a 52-week high in intra-day trading, coming within 2% of its all-time high.

Oil prices jumped over 1% after the US and its allies launched airstrikes against Houthi rebels in Yemen. The strikes were in response to Houthi attacks on shipping vessels in the Red Sea, which had disrupted global trade. The airstrikes drew threats of retaliation from the Iran-backed group, increasing the potential for further disruptions in global trade. Brent futures were trading around $80 a barrel, while West Texas Intermediate futures were just below $73.

Investors are closely monitoring inflation indicators after the recent release of the consumer CPI reading, which came in higher than expected. However, in a turn of events, the Producer Price Index unexpectedly showed a decline in prices last month, bolstering hopes that inflation will continue to ease in the coming months.

Overall, the stock market fluctuated as the earnings season kicked off and oil prices were impacted by geopolitical tensions. Investors remain cautious about inflationary pressures and potential disruptions in global trade.