Stock market today: Dow loses nearly 500 points as inflation woes meet an uneasy earnings start

Stocks stumbled on Friday as the kick off to earnings season amplified worries over a protracted battle against inflation.

The tech-heavy Nasdaq Composite (^IXIC) slid 1.6%, while the S&P 500 (^GSPC) shed 1.5%. The Dow Jones Industrial Average (^DJI) fell 1.2%, or just under 500 points.

Stocks slumped after an underwhelming showing from the banking sector, the first in a wave of corporate earnings that come after a surprisingly hot consumer price print spooked investors earlier this week.

Wall Street is scrutinizing quarterly results from big banks to assess the potential impact if interest rates remain higher than expected this year.

JPMorgan's (JPM) shares fell after its profit beat targets as CEO Jamie Dimon flagged "inflationary pressures" and Federal Reserve policy as concerns. The start to earnings season flattened hopes that corporate updates could revive the early-year stock rally. Wells Fargo (WFC) Citigroup (C), and BlackRock (BLK), the world's biggest asset manager, all fell into the red after their reports.

Meanwhile, precious metals gave up some of their shine: Gold (GC=F) rallied above $2,400 to hit another fresh record, but settled around $2,300, while silver (SI=F) traded at its highest since early 2021. Demand is seen as driven by investors seeking safety amid heightening Middle East tensions but shunning US government bonds in the face of inflation concerns.

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Stocks sink after a rocky start to earnings season

Fri, April 12, 2024 at 4:04 p.m. EDT, Hamza Shaban

A new unease settling on Wall Street wasn't helped Friday with the first batch of corporate updates.

All the major indexes took a tumble at the closing bell after big banks underwhelmed and turned investor attention back to stubborn inflation and the sense that elevated interest rates will stick around.

The tech-heavy Nasdaq Composite (^IXIC) slid 1.6%, while the S&P 500 (^GSPC) shed 1.5%. The Dow Jones Industrial Average (^DJI) fell 1.2%, or just under 500 points.

A look at the week ahead

Fri, April 12, 2024 at 3:30 p.m. EDT, Hamza Shaban

More bellwether earnings of financial services companies are on the way next week, with Goldman Sachs (GS) and Bank of America (BAC) reporting. The banking updates will come after an underwhelming showing on Friday, as investors largely recoiled from weak forecasts and warnings of economic uncertainty and JPMorgan Chase (JPM) and others sank into the red after their reports.

Other big names on deck include United Airlines (UAL) and Netlfix (NFLX). As earnings season kicks off, investors are looking for corporate news to balance what has been a rough patch of inflation worries.

Wall Street has scaled back bets on the number and timing of interest rate cuts for 2024 following another hotter-than-expected inflation reading this week. Fed Chair Jerome Powell has a chance to quell those concerns, or to add credence to them during a planned speech set for Tuesday. The Fed will also publish its latest Beige Book Wednesday.

Insight into retail sales, homebuilder confidence, and industrial production will also provide economic updates as investors grapple with the broad impacts of stubborn inflation.

Yahoo Finance's Brent Sanchez has a graphical breakdown of what to watch next week:

AI's 'mad cow disease' problem tramples into earnings season

Fri, April 12, 2024 at 2:45 p.m. EDT, Hamza Shaban

It used to be enough to mention AI on an earnings call for Wall Street to celebrate. But a more discerning reality is setting in.

Grand ambitions of AI technologies are propped up by gargantuan costs — from extreme demands on natural resources to immense hardware investments. Big Tech's enormous valuations seem less justified, butting up against the improbable state of affairs in AI development.

Now earnings season is coming, and AI is once again driving a handful of mega stocks. But the latest wave of skepticism suggests the hyped-up returns may never arrive.

The web's collection of content — the material that inspires advanced models to generate contrived images or churn out convincing LinkedIn posts — is itself a finite resource. Even the vastness of the internet ends somewhere.

That's triggered a mad dash among AI companies to seek more content: pilfer copyrighted works, transmogrify videos into text, or even use AI-generated material as training data for AI systems.

But relying on synthetic data degrades the quality and reliability of AI models, as research has shown. That highlights a major limitation in the promise of advanced AI.

Researchers at Rice University likened the danger of training generative models on synthetic material to "feeding cattle with the remains (including brains) of other cattle", crafting an AI training analogy to mad cow disease.

The explosion in AI tools has already littered the web with synthetic content, which continues to make up a greater and greater share of the internet. You've probably already noticed it gaming search engine results — authorless, synthetic, and, in the end, useless articles that get your click and brief attention as you search for trustworthy, human information.

This, of course, means that existing AI systems have already ingested their own results.

"It really is about brains corrupting future brains," said Richard Baraniuk, professor of electrical and computer engineering at Rice University, who co-authored the paper.

Other drags on the AI dream are closer to home.

Tech companies are scrambling to reduce their dependence on outside suppliers of AI chips, pouring billions into hardware and infrastructure. Google (GOOG, GOOGL) and Meta (META) unveiled new homegrown chips this week, flashing their costly commitments.

The investments are tickets to prosperity in the AI-led future. But the spending — like the warnings over data and resources — will bring them closer to having to prove it.

Fed’s Schmid wants to hold rates steady

Fri, April 12, 2024 at 2:15 p.m. EDT, Hamza Shaban

Fed watchers have another reason to believe that the anticipated easing of high interest rates might not arrive as soon as many had hoped.

Kansas City Fed president Jeff Schmid said Friday he would prefer to hold interest rates steady and not cut rates until there is "convincing" evidence inflation is dropping, Yahoo Finance's Jennifer Schonberger reports.

Schmid cited the resilience of the US economy and inflation running above the Fed’s 2% target as reasons for the caution.

Inflation, he said, has surprised to the upside since the beginning of the year and has run at roughly 4% since the first quarter.

"Rather than preemptively adjust the policy rate, I would prefer to be patient and wait for clear and convincing evidence that inflation is on track to hit our 2% target before adjusting the stance of policy," Schmid said during a speech before the Agricultural Commodity Futures Conference in Kansas.

Schmid’s comments come as investors have scaled back bets on the number and timing of interest rate cuts for 2024 following another hotter-than-expected inflation reading this week.

The Consumer Price Index (CPI) rose 3.5% over the prior year in March, an acceleration from February's 3.2% annual gain in prices and more than economists expected.

Stocks trending in afternoon trading

Fri, April 12, 2024 at 1:52 p.m. EDT, Hamza Shaban

Here are some of the stocks leading Yahoo Finance’s trending tickers page during afternoon trading on Friday:

AMD (AMD): Shares of the chip giant fell 4% Friday following the latest push from Chinese officials to cut American chipmakers out of their telecommunications systems. Beijing’s efforts to rid the country of US-made chips has intensified tensions between the two nations playing out through a battle over vital technology.

Arista Networks (ANET): The computer networking company plunged 9% on Friday afternoon, following a downgrade to Sell from a Rosenblatt Securities analyst, who cited AI kingpin Nvidia (NVDA) as a threat to the company's growth. Analyst Mike Genovese lowered Arista's price target from $330 to $210.

JPMorgan Chase (JPM): Shares of the banking giant shed 5% Friday afternoon after posting a rise in profits of 6% in the first quarter to $13.4 billion. But investors reeled at the economic warning offered by CEO Jamie Dimon, who said "looking ahead, we remain alert to a number of significant uncertain forces." Dimon pointed to geopolitical tensions and "persistent inflationary pressures" that "may likely continue" and a campaign of quantitative tightening from the Federal Reserve.

CITI: (C): After reporting a slump in profit for the first quarter, shares fell 2% after the company spent more on severance for laid-off workers and after dedicating money to replenish a government deposit insurance fund. Wells Fargo (WFC) shed 0.2% and BlackRock (BLK) lost 2% after they reported earnings, laying out results for the financial services sector that largely rattled investors concerned with higher costs and weaker outlooks.

Stocks slide in afternoon trading

Fri, April 12, 2024 at 12:47 p.m. EDT, Hamza Shaban

Fears of delayed interest rate relief from the Federal Reserve took hold of Wall Street on Friday, as stocks slid in afternoon trading. Investors also took little relief from mixed corporate earnings as the financial services sector posted results that underwhelmed and flashed signs of more economic uncertainty

The tech-heavy Nasdaq Composite (^IXIC) gave up 1.6%, while the S&P 500 (^GSPC) shed 1.4%. The Dow Jones Industrial Average (^DJI) fell 1.2%, or more than 400 points.

The high interest rate challenge for banks

Fri, April 12, 2024 at 11:45 a.m. EDT, Hamza Shaban

High interest rates aren't just squeezing consumers. Even the biggest financial institutions are feeling the impacts of the Fed's tightening campaign.

A key revenue source for three giant banks fell during the first three months of the year, Yahoo Finance's David Hollerith reports.

JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) all said Friday that their net interest income dropped from the fourth quarter to the first quarter. It was down 4% at JPMorgan, 4% at Wells Fargo, and 2% at Citigroup.

Net interest income is a critical measure for many banks, since it measures the difference between what banks earn on their assets and pay out on their deposits.

Smaller banks have struggled to boost this measure over the last year as interest rates and deposit costs soared. Now there are some signs in the first quarter that high rates are starting to weigh on growth even at the nation’s largest lenders.

Consumer sentiment falls slightly in April

Fri, April 12, 2024 at 11:05 a.m. EDT, Hamza Shaban

US consumer sentiment slightly declined in April while inflation expectations for the year ahead and beyond increased, fresh survey data showed on Friday.

The overall index of consumer sentiment registered a preliminary 77.9 this month, according to he University of Michigan's survey, compared to a reading of 79.4 in March.

"Expectations over personal finances, business conditions, and labor markets have all been stable over the last four months," said Surveys of Consumers Director Joanne Hsu in a statement.

But the data showed a slight uptick in inflation expectation, rising to 3.1% from last month's 2.9%, in what Hsu said reflects some frustrations that the comedown in accelerating prices has stalled.

"Overall, consumers are reserving judgment about the economy in light of the upcoming election, which, in the view of many consumers, could have a substantial impact on the trajectory of the economy," she said.

Stocks trending in morning trading

Fri, April 12, 2024 at 10:45 a.m. EDT, Hamza Shaban

Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday:

JPMorgan Chase (JPM): Shares of the banking giant shed 4% Friday morning after posting a rise in profits of 6% in the first quarter to $13.4 billion. But investors reeled at the economic warning offered by CEO Jamie Dimon, who said "looking ahead, we remain alert to a number of significant uncertain forces." Dimon pointed to geopolitical tensions and "persistent inflationary pressures" that "may likely continue" and a campaign of quantitative tightening from the Federal Reserve.

CITI: (C): After reporting a slump in profit for the first quarter, shares fell 0.2% after spending more on severance for laid-off workers and after dedicating money to replenish a government deposit insurance fund. Wells Fargo (WFC) rose 0.1% and BlackRock (BLK) lost 1% after they also reported earnings, laying out mixed results for the financial services sector.

Morgan Stanley (MS): Shares continue to slide for the investment bank after the Wall Street Journal reported that federal regulators are probing how the company assesses wealth management clients “who are at risk of laundering money.” The stock was down 1% on Friday.

Apple (AAPL): After months of largely sitting out the AI storyline Apple unveiled a strong AI push that has investors rejoicing. Shares of the iPhone maker rose 1% Friday, riding the momentum of a Bloomberg report that revealed the company will overhaul its Mac computer line to focus on artificial intelligence, adding $112 billion in value in its best performance in nearly a year.

Oil surges to touch 2024 high amid escalating Middle East tensions

Fri, April 12, 2024 at 10:11 a.m. EDT

Oil futures surged as much as 3% on Friday on reports that Israel is preparing for an imminent attack by Iran on government targets as soon as Saturday.

West Texas Intermediate (CL=F) futures rose to touch an intraday 2024 high of $87.30 per barrel, while Brent futures (BZ=F), the international benchmark price, touched a session high of $92.11 per barrel.

"The escalation of tensions between Israel and Iran is also indicating to traders it may worsen before it gets better, and there seems to be a lot of option call buying as we go into the weekend which is keeping an upward pressure on futures prices," Dennis Kissler, senior vice president at BOK Financial, wrote in a note to clients on Friday.

Crude prices have been on an upward trend this year amid continued output cuts by oil alliance OPEC+ and tensions stemming from the Israel-Hamas war. Ukrainian drone attacks against Russian refineries have also impacted futures to the upside.

WTI is up more than 21% year to-date, while Brent has gained roughly 20% during the same period.

Stocks tumble as banks kick off earnings season

Fri, April 12, 2024 at 9:37 a.m. EDT, Hamza Shaban

Stocks lost ground on Friday as tech names lost momentum and investors braced for the first wave of earnings season, with big bank results starting to roll in.

The tech-heavy Nasdaq Composite (^IXIC) lost 0.9%, while the S&P 500 (^GSPC) shed 0.7%. The Dow Jones Industrial Average (^DJI) fell 0.6%, or more than 200 points.

Jamie Dimon makes a good point to Yahoo Finance on interest rates

Fri, April 12, 2024 at 8:23 a.m. EDT

Fun call just now with reporters and JPMorgan (JPM) CEO Jamie Dimon and CFO Jeremy Barnum.

The topic, of course, was earnings but also Dimon's views on rates and the economy.

Dimon made a good point to me on rates. (I had asked Barnum about how the firm is preparing for "higher for longer" interest rates):

"I just want to point out that rates being higher on their own isn't that important. What is important is why — is it because of stagflation? That's obviously a negative. Or is it because of healthy growth? That's actually pretty good."

Dimon went on to say he is not "predicting" a recession.

Early trend call out from bank earnings: Investment banking

Fri, April 12, 2024 at 7:43 a.m. EDT, Brian Sozzi

One division jumped right off the earnings posts from JPMorgan (JPM) and Wells Fargo (WFC) this morning.

Investment banking.

JPMorgan saw investment banking sales rise 27% from the prior year, fueled by higher debt and equity underwriting fees.

Wells Fargo's investment banking revenue rose 69% year over year.

Sign of more M&A and IPOs coming this year? Let the debate begin.

It's hard to pooh-pooh these BlackRock earnings

Fri, April 12, 2024 at 6:14 a.m. EDT, Brian Sozzi

One should always be hyper-critical of an earnings report and an earnings call. Question everything, good and bad.

That said, I am having trouble tossing cold water on these results out of BlackRock (BLK) this morning. In their simplest form, here is a giant asset manager that grew assets under management (AUM) by $1.4 trillion year over year to $10.5 trillion. At the same time, the company's more watchful eye on expenses drove a 180 basis point improvement in operating margins versus a year ago.

Can't get much better than that, given the size of a BlackRock.

Shares are up close to 2% premarket, deservedly so.

Inside the Apple trade

Fri, April 12, 2024 at 6:01 a.m. EDT, Brian Sozzi

Apple's (AAPL) ticker has found its way back to the Yahoo Finance Trending Tickers page to end the week.

The stock popped on Thursday on a report the company is refreshing its Mac line with new AI-enabled chips. This seems like good news, which may only embolden the bulls kicking the tires again on the tech giant's stock after a 9% year-to-date drop.

The stock has lagged for multiple reasons, neatly presented by JPMorgan analyst Samik Chatterjee in a new client note.

Chatterjee says iPhone sales data is "highlighting headwinds," including in China. There is also concern about downside risk to Apple's services business amid "higher regulatory scrutiny in multiple geographies."

But these worries are now mostly baked into the stock price, contends Chatterjee.

He says investors are starting to warm up to Apple:

• The stock's valuation premium to the broader market has moderated — the stock's valuation is now at the lower end of multiples the shares have traded at recently since the launch of the iPhone 12.

• There is "increasing appetite from investors" in Apple as an "AI upgrade cycle" stock play.