By Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks dropped again on Friday,
building on the sharp selloff of a day earlier, weighed down by a
disappointing earnings report from J.P. Morgan Chase & Co.
Better-than-expected profit from another banking giant, Wells
Fargo & Co., helped to keep losses in check. Sentiment also got
a boost from a bigger-than-expected rise for a gauge that tracks
how consumers feel about the health of the economy.
The S&P 500(SPX) was last down 7 points, or 0.4%, to 1,826
after briefly turning positive. The benchmark is on pace for a
weekly drop of 2.1%. The Dow Jones Industrial Average (DJI) shed 84
points, or 0.5%, to 16,086, leaving it on track for a weekly
decline of 2%.
The Nasdaq Composite(RIXF) was last down 18 points, or 0.5%, to
4,036 after wavering between small gains and losses. The tech-laden
index, which on Thursday endured its biggest one-day percentage
drop since November 2011, is on track for a drop for the week of
2.2%.
While traders on Thursday went after biotech and other
high-growth stocks with a vengeance, driving the Nasdaq to a 3.1%
fall, Friday brought mixed action among tech names. Facebook
Inc.(FB) was up 0.4%, and biotech Gilead Sciences Inc.(GILD) rose
4.2%, but Netflix Inc.(NFLX) fell 0.7%, and Apple(AAPL) slipped
0.6%.
Shares in J.P. Morgan (JPM) lost 3.2% after the banking giant
reported first-quarter earnings below market expectations, making
it the worst performer among Dow components. Meanwhile, Wells Fargo
(WFC) rose 1.2% after its quarterly profit beat forecasts.
In U.S. economic news, the Labor Department said the
producer-price index gained 0.5% in March, topping the 0.1%
increase seen by economists polled by MarketWatch. The Federal
Reserve wants inflation to rise, but the central bank hasn't had
much success in nudging it higher, so officials likely welcomed
Friday's news on wholesale prices.
A consumer sentiment gauge rose to a preliminary April reading
of 82.6, topping expectations. Economists polled by MarketWatch had
expected a preliminary April level of 80.8 for the sentiment index
from the University of Michigan and Thomson Reuters.
Debate over what's next
Some market watchers see further pain for stock investors, but
others have stayed bullish. The sharp slide that started in
so-called momentum stocks has many talking about a shift in
leadership to value from growth now that the current bull market is
more than five years old.
Follow MarketWatch's live blog of Friday's action
"While the market is roughly flat for the year, the recent
leadership rotation is causing understandable angst for many
investors," said Jonathan Golub, chief U.S. market strategist at
RBC Capital Markets, in emailed comments Friday. "We remain
comfortable with our 2,075 S&P 500 target and cyclical sector
bias including overweights in Financials, Industrials,
Discretionary and Health Care."
Golub argued that fundamentally, not much has changed.
"We would be more apt to change this outlook if we saw signs of
either fundamental deterioration in the economy or indications that
Fed policy was negatively impacting markets," he said in his note.
"Neither of these conditions are present, in our view."
On the other hand, Peter Cardillo, chief market economist at
Rockwell Global Capital, maintained this week is just the beginning
of a sizable slide for stocks.
"What happened yesterday is the start of a correction, an
earnings-driven correction," he told MarketWatch. He said
first-quarter earnings won't be "overly terrible," but the latest
batch of results, hurt by severe winter weather, will come in worse
than in prior quarters.
Cardillo predicts the S&P 500 could fall 6% to 8% below
Wednesday's close, which was around 1,872. "I don't think we go
beyond that," he said, referring to a decline of 6% to 8%. (Read
more: Bank of America strategists sees correction in autumn, not
now
http://blogs.marketwatch.com/thetell/2014/04/11/a-bigger-10-15-correction-is-coming-this-autumn-bank-of-america-merrill-lynch/.)
Gap Inc.(GPS) was a notable loser among S&P 500 stocks on
Friday, falling 2.4% but recovering from a deeper intraday loss.
The clothing retailer reported a disappointing 6% decline in its
March same-store sales.
Among other key movers, the iShares Nasdaq Biotech ETF(IBB)
switched between gains and losses. The ETF was last up 0.4%, but
still down 1.2% for the week.
Thursday's sharp selloff for Wall Street markets triggered heavy
selling elsewhere. In Tokyo, the Nikkei 225 index slid 2.4%,
hitting a low for the year so far. The Stoxx Europe 600 closed down
1.4% on Friday, losing 3.1% on the week.
Across other markets, oil prices (CLK4) moved higher, while the
dollar gained against its major rivals. Gold (GCM4) edged
lower.
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