US stocks advanced yesterday, pushing the S&P 500 to its highest since early August, but sharply pared gains late in the session as Citigroup’s steep drop in profit gave investors a reason to unload bank shares.
The financial sector, which has outperformed the broader market so far this year, took a hit on investors’ disappointment with Citigroup’s earnings.
Citigroup’s stock slid 8.1 per cent to $28.25 after it reported weaker-than-expected earnings. The KBW Banks Index lost 1.4 per cent. Through Friday, the KBW Banks Index was up about 10 per cent for the year, while the S&P 500 was about two per cent higher.
The banks’ sell-off poured cold water on a rally that drove the S&P 500 through 1,300 for the first time since August.
Stocks rallied about one per cent across the board after data showed China’s economic growth was better than expected, even though it expanded at the weakest pace in two and a half years.
Citigroup’s results followed similarly disappointing earnings on Friday from JPMorgan Chase.
The Dow Jones industrial average rose 60.01 points, or 0.48 per cent, to 12,482.07 at the close. The Standard & Poor’s 500 Index added 4.58 points, or 0.36 per cent, to 1,293.67. The Nasdaq Composite Index gained 17.41 points, or 0.64 per cent, to 2,728.08.
Bank shares also suffered on Friday ahead of the widely expected announcement by Standard & Poor's that it was downgrading the credit ratings of nine Euroone countries.
While Wells Fargo posted a 20 per cent jump in quarterly profit, its stock, which earlier had risen more than one per cent to a session high at $30.69, pulled back sharply from that peak and ended up just 0.7 per cent at $29.81.
On the downside, Carnival shares slid 13.7 per cent as its Italian unit, Costa Crociere, struggled to locate missing passengers after a cruise liner capsized. Fellow cruise operator Royal Caribbean Cruises fell 6.2 per cent.
Volume totalled 6.74bn shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, just above the daily average of 6.68bn.
Advancing stocks outnumbered declining ones on the NYSE by about three to two, while on the Nasdaq, advancers beat decliners by about 13 to 12.