JPMorgan sneezes, S&P 500 catches cold

Bonds and oil advance

U.S. stocks fell, with the Standard & Poor’s 500 Index headed for the worst week since January, after disappointing results from JPMorgan Chase & Co. Treasuries rose and oil hit a five-week high.

The S&P 500 dropped 0.3 percent at 12:10 p.m. in New York. The Nasdaq Composite Index lost 0.2 percent as technology shares fluctuated after the biggest selloff since 2011. The Stoxx Europe 600 Index declined 1.4 percent. The 10-year Treasury yield lost two basis points to 2.63 percent while 30-year yields hit a nine-month low. The dollar snapped five days of losses as investor risk appetite shrank.

The S&P 500 has fallen 2 percent this week, after sinking 2.1 percent yesterday on concern that valuations aren’t justified as earnings start. JPMorgan, the first major bank to report, fell 3.1 percent after profit dropped on lower revenue from fixed-income trading and mortgages. Consumer confidence rose in April to the highest level since July. China’s producer price index declined 2.3 percent in March, adding to signs of weak demand after data yesterday showed shrinking trade.

“You need to shake out some of the speculative money and throw water on the irrational exuberance,” Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp. which manages $2.2 trillion in client assets, said in a phone interview. “It’s a good reminder that markets don’t go straight up. While the long-term is positive we need to have these steps back along the way. We need this kind of pullback.”

Equities Pullback

The S&P 500 is down 3.2 percent from a record close on April 2. The Nasdaq, which has lost 6.9 percent from a March high, plunged 3.1 percent yesterday, the most since November 2011. A gauge of Internet stocks had it biggest slide since 2011, while biotechnology shares approached a bear market.

The Thomson Reuters/University of Michigan preliminary April index of sentiment rose more than forecast, boosted by further improvement in the labor market that will provide some traction for the economy after a weather-related slowdown.

Investors have been anticipating corporate earnings reports to gauge how much weather effected results. Profit for members of the S&P 500 probably fell 0.9 percent in the first quarter, analysts now forecast, after anticipating a 6.6 percent rise in January. Sales increased 2.6 percent, according to projections.

Analysts have reduced earnings estimates more than they usually do over the last three months, according to Goldman Sachs Group Inc. strategists led by David Kostin. Average profit forecasts for S&P 500 companies fell about 4 percent in the first quarter, a percentage point more than normal, they wrote.

Wells Fargo

The selloff that began last week was sparked by growing concern that valuations may be too high as earnings season begins. The Nasdaq Composite trades at 35 times reported earnings of the companies in the index. That’s double the ratio for the S&P 500, which trades at about 17 times earnings.

Wells Fargo & Co. added 1.6 percent after the most profitable bank in 2013 said earnings rose 14 percent as fewer customers missed loan payments. Bed Bath & Beyond Inc. tumbled the most in three months yesterday after profit fell short of estimates.

“We can still get decent earnings, but all in all, the total level of earnings will probably not grow as much as expected,” Nicola Marinelli, who helps oversee $200 million at Sturgeon Capital Ltd. in London, said by telephone. “Earnings will have subdued growth.”

Alcoa Inc. unofficially started the earnings season on April 8. About 54 companies in the S&P 500 are scheduled to report results next week, including Coca-Cola Co., Goldman Sachs Group Inc., Google Inc. and General Electric Co.

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