By Alexandra Scaggs And Saumya Vaishampayan
U.S. stocks turned lower in bumpy trading Thursday, while
financial stocks lagged behind after a pair of bank earnings
reports fell short of Wall Street forecasts.
The Dow Jones Industrial Average fell 42 points, or 0.2%, to
17384. The S&P 500 was down seven points, or 0.3%, to 2004 and
the Nasdaq Composite Index slipped 25 points, or 0.5%, to 4613.
Financial stocks trailed broader indexes, after two major U.S.
banks reported disappointing results.
Bank of America Corp. fell 2.2% after it said its fourth-quarter
profit fell 11%, hurt by lower trading revenue. Results missed
expectations.
Citigroup Inc. fell 2.1% after it said its fourth-quarter profit
plunged 86% from a year earlier, weighed down by a massive legal
charge and disappointing trading revenue.
"Right now, earnings are in focus," said Dan Greenhaus, chief
strategist at New York brokerage BTIG.
In other earnings news, retailer Best Buy Co. slumped 15% after
the company warned it will boost spending on efforts to fuel
growth, which should start pressuring earnings next quarter.
Prices of safe-haven investments gained. Treasury prices rose,
pushing the yield on the 10-year note down to 1.826% from 1.833% on
Wednesday. Gold futures rose 1.8% to $1256.30.
An early jump in oil prices helped support a broad advance at
the open of trading, when the Dow gained as many as 90 points.
Then, stocks turned lower, with the Dow losing as many as 94 points
as oil futures pared their gains. Crude oil was recently little
changed at $48.52 a barrel.
Thursday's morning turbulence follows multiple intraday swings
this month, amid a continuing rise in volatility. The CBOE
Volatility Index, which measures expectations for swings in the
S&P 500, has closed above its 10-year average of 20 for two
sessions in a row, as of Wednesday. It rose further Thursday,
climbing 2.5% to 22.01.
Many investors believe stocks can continue to rise in 2015, but
they say the path higher will be bumpier. Dan Morris, global
investment strategist at TIAA-CREF, which manages about $600
billion, said he was cautiously optimistic on U.S. stocks in 2015,
expecting smaller returns than in recent years.
One reason is the outlook for earnings growth. There is "not an
expectation for a big acceleration in earnings," he added. Analysts
expect fourth-quarter earnings growth to be the slowest since the
third quarter of 2012.
In other economic news, data showed that U.S. inflation fell by
less than expected. The producer price-index fell 0.3% in December
from a month earlier, the Labor Department said. The index measures
the prices firms get for their goods and services. Excluding food
and energy, prices rose 0.3%. Economists surveyed by The Wall
Street Journal had expected overall prices to fall 0.4% and prices
excluding food and energy to climb 0.1%.
Earlier, stock futures had fallen sharply after Switzerland's
central bank scrapped its policy of capping the Swiss franc at 1.20
to the euro. The Swiss National Bank has intervened in markets
since September 2011. In the wake of the SNB's move, the euro
dropped as low as 0.93 francs.
There is "rising volatility across fixed income, across equities
and across currencies. That's unusual," Mr. Morris said. "The
fundamental cause for that is that you have monetary policy that is
out of sync globally," he added, referring to a potential
tightening of monetary policy in the U.S. and loose policies in
Europe and Japan.
Still, European stocks rose broadly, with the Stoxx Europe 600
up 2.2%. Germany's DAX Index rose 2%, France's CAC 40 gained 1.8%
and Italy's FTSE MIB rallied 2.4%.
Write to Alexandra Scaggs at alexandra.scaggs@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
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