US stocks slide as disappointing bank earnings prompt end-of-week sell-off

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  • US stocks sank on Friday as investors digested disappointing bank earnings and a December slump in retail sales.
  • Retail sales shrank 0.7% in December as COVID-19 lockdowns cut into holiday-season spending, according to Census Bureau data published Friday. Economists expected sales to hold flat from November.
  • Less-than-stellar earnings reports from Citigroup and Wells Fargo led financials to drag on the S&P 500.
  • While Democrats' soft Senate majority lifts the odds of Biden signing his newly announced stimulus deal, Republicans could push for higher taxes to offset its cost or a stripped-down version of the measure.
  • Watch major indexes update live here.

US equities sank for a second-straight session on Friday amid a drop in retail sales and as President-elect Joe Biden rolled out his plan for additional fiscal stimulus.

Fourth-quarter earnings kicked off with JPMorgan beating revenue and profit expectations. The bank reported a 42% jump in net income, bolstered by the release of $2.9 billion in loan-loss reserves.

Other firms posted less positive results. Citigroup's revenue landed above estimates, but weaker-than-expected performance in its fixed-income division contributed to a miss on quarterly earnings. Wells Fargo shares slid after the firm's fourth-quarter revenue came up short of analyst estimates.

Here's where US indexes stood at the 4 p.m. ET close on Friday:

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Energy stocks joined sinking financials as the biggest underperformers in the S&P 500. Real estate and utilities stocks outperformed through the session.

On the economic data front, disappointing retail sales weighed on bullish sentiments. Spending at US retailers contracted 0.7% in December as COVID-19 restrictions offset holiday-season sales, according to Census Bureau data published Friday. Economists surveyed by Bloomberg expected sales to stay flat from the month prior.

November's reading was revised lower to a 1.4% contraction, suggesting surging coronavirus cases and lockdown measures swiftly cut into a V-shaped rebound in consumer spending.

"This likely is the nadir for retail sales, as the late-December stimulus and the pending stimulus under the Biden administration will boost both bank accounts and consumers' spirits," Robert Frick, corporate economist at Navy Federal Credit Union, said.

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Biden unveiled a $1.9 trillion fiscal relief plan on Thursday that includes $1,400 direct payments, expanded federal unemployment benefits, and state and local government aid. Democrats' victories in Georgia runoff elections greatly improve the party's chances at passing such a sweeping stimulus measure.

Yet GOP opposition could strip the bill of some components before its passage. Lawmakers could also call for higher taxes to justify the legislation's hefty price tag, a move that would surely rankle investors hoping for President Donald Trump's low tax rates to remain in place.

"At some point in early February, the relief package will probably end up being closer to $1 trillion," Edward Moya, senior market analyst at Oanda, said.

The prospects of additional stimulus, coupled with strong consumer spending at the start of the month, was enough for Bank of America to lift its near-term growth outlook. The bank's economists lifted their forecast for first-quarter growth in the US to 4% from 1% and boosted their full-year GDP estimate to 5% from 4.6%.

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Bitcoin dropped below $36,000 as the cryptocurrency's volatile trading week came to a close. The token climbed back above $40,000 on Thursday but failed to retake the record highs seen one week ago.

Spot gold slid 1.2%, to $1,823.42 per ounce, at intraday lows. The US dollar strengthened against all Group-of-10 currency peers and Treasury yields declined.

Oil prices sank as the stronger dollar cut into its recent climb. West Texas Intermediate crude fell as much as 3.3%, to $51.83 per barrel. Brent crude, oil's international benchmark, dropped 3.2%, to $54.64 per barrel, at intraday lows.

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