While you were sleeping: US bank stocks drop in pre-earning season jitters

Stocks on Wall Street fell, dragged lower by bank shares a day before Citigroup and JP Morgan Chase kick off the earnings reporting season.

The Dow Jones Industrial Average declined 59.44 points, or 0.3%, to 20,591.86, while the S&P 500 slipped 0.4% to 2344.93. The Nasdaq Composite lost 0.5% to 5836.16.

The Dow’s drop was led by manufacturing exporters Caterpillar, down 2.3%, and Boeing, down 1.4%.

Citigroup, JP Morgan and Wells Fargo are all set to report their first-quarter earnings before the stock market opens on Thursday, unofficially launching earnings season.

Nevertheless, US companies are expected to report their strongest quarterly earnings since 2011, as of March 31, according to FactSet.

Solid first-quarter results are needed to support the post-election stocks rally. If stocks are to remain at these levels, earnings must live up to expectations, analysts say.

“The market has priced in this earnings recovery,” Andrew Slimmon, senior portfolio manager with Morgan Stanley Investment Management, told Dow Jones.

He adds that stocks seem to be in “quiet season” ahead of the onslaught of first-quarter earnings and that’s led to some stalling in stock prices.

“The good news is, usually when the markets have stalled going into earnings season, it sets up for a good period for stocks during earnings,” he says.

Focus on the economy
While geopolitical worries from the Middle East to the Korean Peninsula, as well as the timing of US tax reforms and the French presidential election, have attracted investors’ attention, mostly they have focused on the health of the US economy.

“Markets are thrown a geopolitical curveball from time to time but economic data is good and there is still every reason to believe in risk,” says Geoffrey Yu, head of the UK investment office at UBS Wealth Management.

United Airlines’ stock erased all of its post-passenger eviction scandal losses, advancing as much as 1.4% in intraday trade before closing down 1.1%. This came on the heels of Tuesday’s stock plunge, which wiped about $US255 million off the company’s market cap.

Whole Foods Market rose 1,7% after Bloomberg reported Amazon had shown an interest in the retail chain but did not go ahead with the deal.

The yield on the benchmark 10-year US Treasury note ticked lower to 2.294% from 2.298% on Tuesday. The WSJ Dollar Index fell 0.3% after President Donald Trump told the Wall Street Journal in an interview that the dollar “is getting too strong.”

Oil prices ended a six-session streak of gains after federal data showed crude output continued its relentless growth. US crude futures settled down 0.54% at $US53.11 a barrel.

European stocks recovered, led by oil companies and car makers. The Stoxx Europe 600 index picked up 0.2% to close at 381.90, ending at its highest close since early December 2015.

Germany’s DAX 30 rose 0.1%, France’s CAC 40 was down marginally and the UK’s FTSE 100 was down 0.2%.