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MARKETS IN REAL TIME Wall Street falls, led by 1% Dow drop

MARKETS IN REAL TIME Wall Street falls, led by 1% Dow drop

Jan 14 - Welcome to the home for real-time markets coverage brought to you by Reuters reporters.

WALL ST FALLS, LED BY 1% DOW DROP (1250 EST/1750 GMT)

In afternoon trading, major stock indexes in the United States were reduced by more than 1% on Friday, while Wall Street's fear gauge, and the Cboe Volatility index were sharper.

JPMorgan Chase is the biggest drop on the S&P 500, with its stock falling more than 6% after reporting a weaker performance at its trading division, though the company exceeded its earnings expectations for the fourth quarter.

The S&P 500 bank index, which has risen to new highs, has fallen 2.2 percent on the day.

Here is the early afternoon market snapshot of the United States.

(Caroline Valetkevitch)

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EUROPE WEEK 2: 15% GAP BETWEEN TECH AND BANKS (1150 EST/1650 GMT)

The session concludes with a second week of losses for European equities and a 1.4 percent decline since the beginning of the year.

While the performance of the pan-European STOXX is not that spectacular, the gap between winners and losers is truly.

In early 2022, we see how a rapid inflation/monetary tightening period can unfold for equities.

Consider this: European banks are up 10% so far in 2022, while tech firms are up 5.2 percent, putting the gap in two weeks on.

Despite many central banks considering - and hoping - that inflation would peak later this year, the sectors which are typically boosted by rising prices are thriving.

Oil & gas sales are up 9.2 percent in early days of 2022, with miners up 7.5 percent, and insurers rising 5.9 percent.

Autos are also up a hefty 8%, as the hype surrounding EVs is a lot of consideration for European investors.

For defensive sectors, like healthcare, it's quite a different story, which is already down 6%.

Here are a few of the sectors of the STOXX 600 that went on display today and this year.

(Julien Ponthus)

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BANKING ON IT: A VALUE STOCKS TOP PICK FOR THE LONG TERM (1130 EST/1630 GMT)

Bank stocks are high on investors' lists as they are expected to benefit from increased lending margins due to higher yields.

Summit Global Investments' chief investment officer Dave Harden picks value stocks over growth in the long-term and predicts a "tremendous year" for US banking stocks in 2022, despite the drop they took on Friday.

The S&P 500's banking industry has gained 9.5 percent last week as Treasury yields increased on rate rise expectations compared to a 1.9 percent drop in the benchmark index. Harden predicts at least three Federal Reserve hikes with a more than 60% chance of a fourth.

According to Vanda Research's weekly report on retail flows, retail investors have increased their exposure to lenders' stocks.

Financials were among the most sought after equity sectors in recent history, with small-time investors increasing their share price by $289 million over the last week, compared to an average of $190 million over the past two years, according to the report.

Harden told the Reuters Global Markets Forum on Thursday that JPMorgan and Bank of America continue to outperform in 2022.

"People seem to be haters here. Meta Platforms is very cheap -- bottom quartile -- compared to other large Tech names. But their growth is above average and their margins are top quartile...I know this is not popular but it's time."

(Sanjana Shivdas and Aaron Saldanha)

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ER, DATA: A FRIDAY ECON WRAP-UP (1100 EST/ 1600 GMT)

On Friday, a torrent of information on market participants was released, reminiscent of a pack of dobermans. It was packed full of mostly unpleasant surprises, which gave fresh reminders that Omicron is still being used in the United States, prompt inflation is and a tight supply chain.

According to the Commerce Department, receipts and sales in the United States decreased unexpectedly by 1.9 percent last month.

The decrease was wide based on line-by-line, with non-store retailers (which includes online and catalog), and department stores experiencing the most significant declines, tumbling by 8.1 percent and 7.0% respectively.

COVID cases kept shoppers at home, as well as pandemic-related supply issues kept goods low and prices high.

"December was a rough month for the American consumer," says Anu Gaggar, global investment strategist at Commonwealth Financial Network. "Between higher prices, empty shelves, consumers sick of omicron, and holiday shopping pulled forward, retail activity decreased even more than expected, and November numbers were also revised lower."

Despite the threat of supply, many consumers - in response to these demands - have begun their holiday shopping earlier than usual, benefiting from the number of October as a result.

Core retail sales, which excludes automobiles, gasoline, building materials, and food services, and is the closest proxy for the personal consumption component of GDP, have dropped to a 3.1 percent increase.

That is particularly dour news, given the fact that the consumer is responsible for about 70% of the US's economic growth.

This month, consumers are being criticized for their behaviour.

Consumer Sentiment, a preliminary take from the University of Michigan, produced a print of 68.8, less than the even 70 consensus.

Attitudes about the current situation have decreased, but pessimism in the near term does the most damage.

Inflation had a major impact on consumers in the first weeks of 2022, with near- and long-term inflation expectations rising to 4.9 percent and 3.4 percent respectively.

"While the Delta and Omicron versions contributed to this downward shift, it was also attributed to a rising inflation rate," writes Richard Curtin, chief economist of UMich's Surveys of Consumers. "Three-quarters of consumers ranked inflation... as the most serious issue facing the country."

The central position of the organisation gives it a fresh taste.

According to the Labor Department, the prices Americans pay for imported goods also defied consensus by inching 0.2% lower in December.

The decline in petroleum prices was responsible for the result, but it adds another voice to the growing chorus that the persistent inflation wave has pushed the Federal Reserve to shorteren its duration of enforcement of its COVID-era monetary policy.

Year on year, import price growth cooled down, bringing the import price to a tens of thousands of dollars, bringing the price to 1.3 percent.

As the Federal Reserve moves toward tightening monetary policy, Mahir Rasheed, a US economist at Oxford Economics, believes "import rates should begin to unwind in Q2.

Despite the decline in December, the series continues to be shorter than other important indicators, all of which remain at an altitude far above the Fed's average annual 2% inflation target.

Another unwelcome surprise was a result of the Federal Reserve's industrial production report, which showed that production dipped unexpectedly by 0.1 percent in the last month of 2021.

Manufacturers are even more disappointed, with factory output falling 0.3 percent in defiance of the projected 0.5% growth economists.

The rise in manufacturing is a disappointment, and it can't all be blamed on the ongoing supply problems in the automobile industry, where production is down 1.3 percent.

Capacity utilization zagged when it was expected to zig, inching nominally down to 76.5% instead of risen to 77%.

Despite this, capacity use, a measure of economic slack, remains somewhat above what it was just before a global health crisis drew a monkey wrench into the works.

The Fed's report is a bluff reminder of the world's supply chain, which continues to fade under the pressure of rising demand, shortage of materials, and lack of employees.

In more ancient news, the value of goods in the store rooms of business in the United States increased by 1.3 percent in November, bucking the trend by catching the bulls eye.

The Commerce Department's data is excellent for growth in the fourth quarter, suggesting that the contribution of private inventories might be canceled due to the second quarter of 2021.

Investors are in a selling position as a result of the data wolves and a mixed set of big bank earnings from JPMorgan Chase, Citigroup, and Wells Fargo.

All three major stock indexes in the United States were red, with cyclicals and economically sensitive transports down the most.

(Stephen Culp)

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AS Q4 EARNINGS GATE OPENS (1005 EST/ 1505 GMT) BANK STOCKS STUMBLE

The u.s. bank announced a slowing earnings increase on Friday, causing JPMorgan to tumble 4.8 percent and Citigroup to tumble 2.4 percent. Only Wells Fargo shares were in demand with a 1.4% increase.

The S&P 500 bank index was last trading down 2.0 percent on the day after hitting an intraday record high in the previous day's session. It ended up up Thursday 10.4 percent so far for 2022, following a 32.3 increase.

Despite JPMorgan being the largest US bank that is a barometer of the economy's health, Wall Street exceeded expectations even as it reported a 14% profit decline due to a slowdown in trading, which offset a stellar performance in investment banking.

Thanks to a bumper deal year, trading revenues fell 13%, while investment banking revenues increased 28%.

Erika Najarian, an UBS analyst, wrote in a note ahead of the conference call that JPM's expenses projections are 6% above consensus.

"This does not fit the "beat and raise" strategy investors have for banks in 2022,," she said.

On Friday, Citigroup reported a drop in profit by 26% as a result of higher expenses and a decrease in its consumer banking business.

However, Wells Fargo beat analyst profit estimates in the quarter as a boost in US economic growth encouraged more consumers to take loans and the bank kept a tight lid on costs.

Investors are concerned about other big banks' reports coming next week, with Morgan Stanley falling 2.6 percent and Goldman Sachs falling 2.4 percent.

(Sinead Carew)

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WALL STREET IS RECORDED FOR REMAINING RISK-OFF (0915 EST/1415 GMT)

Stock futures on Wall Street compared to the same day in December, but retail sales in the United States dropped instead of keeping the stock stable, and banking results at the beginning of earnings seasons failed to provide a motivation for improving risk-off sentiment.

Retail sales have dropped 1.9% since the first 0.2% increase in November, according to the Commerce Department, whereas economists polled by Reuters had predicted retail sales to remain unchanged.

JPMorgan Chase & Co's stock price has dropped for the second quarter due to a slowdown in its investment banking division.

Citigroup slid after the bank reported a 26% drop in quarterly earnings, but the company exceeded market expectations, as strong gains in its investment banking business slowed the blow.

Wells Fargo & Co.'s earnings from fourth quarter are also higher than expectations.

Before the opening bell, stock markets for the Dow Industrials, the S&P 500, and the Nasdaq were all down about 0.8 percent.

Here's a preview of the market:

(Herbert Lash)

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