By Sue Chang, MarketWatch , Ryan Vlastelica
J.P. Morgan posts better-than-expected earnings but trading slumps
The U.S. stock market heralded the beginning of third-quarter earnings season by finishing slightly lower on Thursday, even as Wall Street banks turned in generally upbeat results.
Read:Bank earnings: 'Lower for longer' means buybacks will continue (http://www.marketwatch.com/story/bank-earnings-lower-for-longer-means-buybacks-will-continue-2017-10-06)
How did the main benchmarks fare?
The Dow Jones Industrial Average fell 31.88 points, or 0.1%, to close at 22,841.01. The S&P 500 shed 4.31 points, or 0.2%, to end at 2,550.93, while the Nasdaq Composite dropped 12.04 points, or 0.2%, to finish at 6,591.51. The benchmarks traded in a relatively narrow band.
All three indexes closed at records on Wednesday, extending their strong year-to-date moves. Thus far in 2017, the Dow has gained nearly 16%, the S&P is up 14%, and the Nasdaq has risen 23%.
Read:The Dow's flirtation with 23,000 is a sign of the stock market's velocity (http://www.marketwatch.com/story/the-stock-markets-velocity-has-the-dow-flirting-with-230000-2017-10-05)
And see:Investors face 'mental exhaustion' in markets where nothing is 'normal' (http://www.marketwatch.com/story/investors-face-extreme-mental-exhaustion-due-to-high-valuations-low-volatility-2017-10-10)
What drove the markets?
Banks kicked off what is likely to be strong season of third-quarter corporate results (http://www.marketwatch.com/story/third-quarter-earnings-seen-as-an-easy-beat-could-set-up-more-stock-market-records-2017-10-09) that analysts say could extend the market's record-setting streak.
On the data front, initial weekly jobless claims fell by 15,000 (http://www.marketwatch.com/story/unemployment-rolls-shrink-to-44-year-low-jobless-claims-show-2017-10-12) to 243,000 in early October to mark the lowest level in six weeks. Economists polled by MarketWatch had forecast claims to total 250,000. The producer-price index rose 0.4% (http://www.marketwatch.com/story/us-wholesale-inflation-zooms-higher-in-september-2017-10-12), matching consensus expectations.
Meanwhile, Fed Gov. Jerome Powell, speaking to the annual meeting of the Institute of International Finance, said emerging markets should be able to withstand (http://www.marketwatch.com/story/emerging-economies-should-be-able-to-weather-fed-tightening-powell-says-2017-10-12) the Fed's tightening initiatives, which could boost the dollar. He also described asset prices as "elevated."
Ex-Fed Chairman Ben Bernanke said the central bank should adopt "temporary" price-level (http://www.marketwatch.com/story/bernake-proposes-fed-adopt-temporary-price-level-targeting-to-combat-next-recession-2017-10-12)targeting when interest rates next get stuck at zero.
What are strategists saying?
"Investors are following the tax-reform debate, as well as clues as to who will be nominated as the next Federal Reserve chairman. Currently, Fed Gov. Powell appears to be the favorite. He would offer continuity in terms of monetary policy, but his comments suggest a more favorable position with regard to regulatory reform," said Quincy Krosby, chief market strategist, at Prudential Financial.
"Basic fundamentals are good, companies are making money, and I think the market will be relatively strong throughout earnings season, but I don't see a huge spike up between now and the end of the year because a lot [of earnings optimism] has been priced in," said Gary Droz, managing director at MainLine Private Wealth.
Equities have gone an unusually long time without a pronounced pullbacks, with dips of even 3% in short supply. Droz said this was something that merited watching.
"We don't want to lull ourselves into a complete coma. Anything could trigger a drawdown; markets need to breathe," he said.
Which stocks were in the spotlight?
J.P. Morgan Chase & Co. (JPM) posted earnings and revenue that beat expectations (http://www.marketwatch.com/story/jp-morgans-profit-buoyed-by-lending-2017-10-12), although its trading revenue was weak amid a quiet period for markets. Shares dipped 0.9%.
Citigroup Inc. (C)reported a higher-than-expected profit (http://www.marketwatch.com/story/citi-earnings-beat-boosts-stock-2017-10-12), but shares skidded 3.4%. The Financial Select Sector SPDR ETF(XLF) lost 0.8%.
Both J.P. Morgan and Citigroup have been strong performers over the past year; J.P. Morgan is up 41% and Citigroup has gained almost 50% over the past 12 months.
Domino's Pizza Inc. (DPZ) reported earnings and sales that beat expectations (http://www.marketwatch.com/story/dominos-pizza-beats-profit-and-sales-expectations-but-stock-falls-2017-10-12), but shares fell 3.9%.
And see:Third-quarter earnings seen as 'an easy beat,' may bring more market records (http://www.marketwatch.com/story/third-quarter-earnings-seen-as-an-easy-beat-could-set-up-more-stock-market-records-2017-10-09)
Telecom (http://www.marketwatch.com/story/att-warns-of-lower-q3-revenue-profit-on-hurricanes-mexican-earthquakes-2017-10-11)AT&T Inc.(T), retailer (http://www.marketwatch.com/story/jjill-shares-plummet-after-outlook-cut-2017-10-11)J. Jill Inc.(JILL) and networking equipment maker (http://www.marketwatch.com/story/juniper-networks-shares-fall-after-profit-revenue-warning-2017-10-11)Juniper Networks Inc.(JNPR) look on track for down days after each company issued a profit warning late Wednesday.
Shares of AT&T stumbled 6.1% while J. Jill tumbled 51%. Juniper slumped 5.2%.
Health-care stocks were mixed after President Donald Trump signed an executive order directing federal agencies to consider expanding health-insurance coverage in low-cost plans (http://www.marketwatch.com/story/trump-order-encourages-cheap-insurance-plans-not-subject-to-obamacare-rules-2017-10-12) that aren't subject to Affordable Care Act rules, a move that could raise costs for sicker people. The order is designed to provide what the White House calls "alternatives" to plans offered through Obamacare markets.
Humana Inc.(HUM) rose 0.4% while Aetna Inc.(AET) fell 1.2%.
CarGurus Inc.(CARG) soared 72% on its Nasdaq debut after pricing shares of its initial public offering above an expected range (http://www.marketwatch.com/story/cargurus-prices-ipo-above-expected-range-at-16-a-share-2017-10-11). The company helps buyers find deals on new and used cars.
How did other assets perform?
Bitcoin on Thursday was soaring to new all-time highs above $5,100 (http://www.marketwatch.com/story/bitcoin-soars-to-a-new-all-time-high-above-5100-2017-10-12).
European stocks (http://www.marketwatch.com/story/spanish-stocks-pull-back-after-rally-as-other-european-markets-struggle-for-direction-2017-10-12) finished mixed, while most Asian markets closed higher, with Japan's Nikkei benchmark finishing at a fresh 21-year high (http://www.marketwatch.com/story/nikkei-keeps-rising-as-asian-markets-extend-gains-2017-10-11).
Gold futures settled in the green (http://www.marketwatch.com/story/gold-rises-tries-to-regain-grip-on-1300-level-2017-10-12), while oil futures pulled back as the International Energy Agency said the world's crude supply expanded (http://www.marketwatch.com/story/oil-supply-rises-as-us-production-keeps-up-pace-despite-hurricanes-iea-2017-10-12) in September on the back of steady U.S. production growth. The ICE U.S. Dollar Index was flat after falling Wednesday as minutes from the last Fed meeting showed some policy makers wondered whether an interest rate rise (http://www.marketwatch.com/story/december-rate-hike-not-automatic-minutes-of-last-months-meeting-show-2017-10-11) was needed in December.
--Victor Reklaitis contributed to this article.
(END) Dow Jones Newswires
October 12, 2017 16:37 ET (20:37 GMT)
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