Wall St dips to lower close as rate hike bets firm

Wall Street ended lower on Friday as a barrage of mixed economic data appeared to affirm another Federal Reserve interest rate hike, dampening investor enthusiasm after a series of big US bank earnings launched first-quarter reporting season.

All three major US stock indexes ended in the red, but well off session lows. On the heels of Thursday's robust rally, all three major US stock indexes notched weekly gains, reported Reuters.

"Today we're taking bit of a breather," said Sal Bruno, chief investment officer at IndexIQ in New York. "After yesterday's sharp move up, the market might have gotten a little ahead of itself."

Citigroup Inc (C.N), JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co (WFC.N) beat earnings expectations, benefiting from rising interest rates and easing fears of stress in the banking system.

"As expected, the bigger banks were probably not harmed that much by the regional banking turmoil, and possibly even beneficiaries of it," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. "We saw mostly strong and healthy balance sheets, and it's pretty clear (the regional banking) crisis isn't systemic."

The S&P 500 banking sector (.SPXBK) jumped 3.5% and JPMorgan Chase surged 7.6%, its biggest one-day percentage gain since Nov. 9, 2020.

Citigroup advanced 4.8% while Wells Fargo edged 0.1% lower.

But a slew of mixed economic data including retail sales, industrial production and consumer sentiment cemented expectations that the Fed will hike rates another 25 basis points at next month's policy meeting.

"Industrial production and capacity utilization came in stronger than expected," Bruno added. "Both point to an economy that still has some vibrancy, which gives Fed cover to continue its rate hike policy in May possibly into June."

Those expectations were underscored by Atlanta Fed President Raphael Bostic, who said another 25 basis point hike could allow the Fed to end its tightening cycle, even as Chicago Fed President Austan Goolsbee called for the central bank to be prudent.