Wall Street drops as big banks fall after results

New York: Wall Street's main indexes dropped on Friday, with the biggest drag coming from big U.S. banks after their earnings reports while the energy sector was also weighed down by a regulatory probe into Exxon Mobil Corp.

The S&P 500 banks index was down 2.8per cent as shares of Wells Fargo & Co, JPMorgan Chase & Co and Citigroup Inc tumbled even though they had posted better-than-expected fourth-quarter profits. The bank sector had rallied sharply in recent days.

Wells Fargo, down 7per cent, was the biggest drag on the S&P 500 followed by Exxon Mobil, down 4per cent.

Wall Street's main indexes were set to end the week lower after climbing to record highs recently on bets of a hefty fiscal stimulus package and optimism about vaccine distribution.

"Financials and energy has been disappointing ... that's bringing down the whole market," said Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance in Charlotte, NC.

"This year is the year for financials, energy, materials, industrials. So if there is a day when they're not leading, it's not good news for the market."

Also on investors' minds was incoming U.S. President Joe Biden's stimulus proposal, unveiled on Thursday.

The US$1.9 trillion proposal included some US$1 trillion in direct relief to households.

Four of the 11 major S&P were gaining ground, with real estate as the biggest percentage gainer with a 1per cent gain, while energy fell 3.2per cent, posting the deepest decline.

By 2:20 p.m. ET (1920 GMT), the Dow Jones Industrial Average fell 104.42 points, or 0.34per cent, to 30,887.1, the S&P 500 lost 18.1 points, or 0.48per cent, to 3,777.44 and the Nasdaq Composite dropped 52.33 points, or 0.4per cent, to 13,060.30.

Earnings for S&P 500 companies are expected to decline 9.5per cent in the final quarter of 2020 from a year ago, but are expected to rebound in 2021, with a gain of 16.4per cent projected for the first quarter, according to IBES data from Refinitiv.

Exxon shares fell after a report said that the U.S. Securities and Exchange Commission launched an investigation of the oil major, following a whistleblower's complaint that the company overvalued a key asset in the prolific Permian shale oil basin.

Spotify Technology SA dropped about 5.9per cent after Citigroup downgraded its shares to "sell".

Hewlett Packard Enterprise Co rose 0.9per cent after J.P. Morgan upgraded the enterprise software maker's stock to "overweight."

Declining issues outnumbered advancing ones on the NYSE by a 2.05-to-1 ratio; on Nasdaq, a 2.04-to-1 ratio favored decliners.

The S&P 500 posted eight new 52-week highs and no new lows; the Nasdaq Composite recorded 158 new highs and five new lows.

(Additional Reporting by Devik Jain and Medha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty and Maju Samuel)