NEW YORK, (Reuters) – U.S. stocks wrapped up their worst week in four months, led lower today by financial shares as results from Wells Fargo and JPMorgan ignited concerns about shrinking profit margins for big lenders.
Shares of Wells Fargo fell 2.6 percent to $34.25 and JPMorgan Chase & Co lost 1.1 percent to $41.62 as concerns grew over their lower net interest margin – the difference between what a bank pays on deposits and what it makes on loans – which could narrow further as the Federal Reserve keeps interest rates near zero.
The lackluster market reaction came even though both Wells Fargo and JPMorgan, the two largest U.S. financial stocks by market value, reported record profits.
“Bank shares as a group have had a nice move (up) this year so far,” said Ken Polcari, managing director at ICAP Equities in New York. “Guidance is cautious so people are taking money off the table.”
The results sparked a selloff in other bank shares. An S&P financial index, down 1.4 percent, represented the worst performer of the S&P 500’s top 10 sectors. The KBW Bank index lost 2.5 percent.
Polcari said the low volume that came with this week’s decline indicated this was not a sign of panic. Since hitting a near five-year intraday high of 1,474.51 on Sept. 14, the benchmark S&P 500 Index has fallen 3.1 percent.
“If we keep getting negative reports, selling will pick up,” he said.
Expectations are low for S&P 500 companies’ results. Quarterly earnings are forecast to fall 3 percent from a year ago, compared with a 2.1 percent drop estimated at the start of the month, according to Thomson Reuters data.
The Dow Jones industrial average edged up 2.46 points, or 0.02 percent, to 13,328.85 at the close. But the S&P 500 fell 4.25 points, or 0.30 percent, to finish at 1,428.59. The Nasdaq Composite dipped 5.30 points, or 0.17 percent, to 3,044.11.
The S&P 500 closed right above its 50-day moving average, barely enough to avoid going into the weekend with a technical red flag hanging over the market.
Despite several encouraging data points this week, the benchmark S&P 500 fell 2.2 percent – its worst weekly performance since the week ended June 1.