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Financial Markets                      04/12 15:56

   

   NEW YORK (AP) -- U.S. stocks tumbled Friday following a mixed start to 
earnings reporting season. Worries about potentially escalating tensions in the 
Middle East rattled financial markets, pushing investors to look for safer 
places for their money.

   The S&P 500 sank 1.5% to close out its worst week since October, when a huge 
rally on Wall Street began. The Dow Jones Industrial Average dropped 475 
points, or 1.2%, and the Nasdaq composite fell 1.6% from its record set the day 
before.

   JPMorgan Chase was one of the heaviest weights on the market and sank 6.5% 
despite reporting stronger profit for the first three months of the year than 
analysts expected. The nation's largest bank gave a forecast for a key source 
of income this year that fell below Wall Street's estimate, calling for only 
modest growth.

   The pressure is always on companies to produce fatter profits. But it's 
particularly acute now given worries that the other main lever that sets stock 
prices, interest rates, may not offer much lift in the near term.

   A stream of reports this year has shown both inflation and the overall 
economy remain hotter than expected. That's forced traders to scale back 
forecasts for how many times the Federal Reserve may cut its main interest rate 
this year. Traders are largely betting on just two cuts, according to data from 
CME Group, down from forecasts for at least six at the start of the year.

   U.S. stock indexes had already run to records in part on expectations for 
such cuts. Without easier interest rates, companies will need to produce bigger 
profits to justify their stock prices, which critics say look too expensive by 
various measures.

   This year's jump in oil prices has further raised worries of more upward 
pressure on inflation. Oil rose again Friday as tensions continue to roil the 
Middle East. Israel has said it could strike Iran if it launched an attack from 
its territory following the killings of Iranian generals in a blast at the 
Iranian consulate in Syria.

   Brent crude, the international standard, rose 0.8% to settle at $90.45 per 
barrel. It briefly topped $92 during the day and is roughly back to where it 
was in October.

   At the same time, Treasury yields in the bond market sank and the price of 
gold rose, which is typical when investors are herding into investments seen as 
safer.

   The yield on the 10-year Treasury fell to 4.51% from 4.58% late Thursday. 
Gold, which has been setting records, got close to touching $2,450 per ounce 
for the first time before paring its gain.

   Adding to the nervousness was a preliminary report suggesting sentiment 
among U.S. consumers is sinking. It's an important update because spending by 
U.S. consumers is the main engine of the economy.

   Perhaps more worrisome was that U.S. consumers may be getting more 
pessimistic about inflation. Their forecasts for inflation in the coming 12 
months hit the highest level since December. Such expectations could ignite a 
self-fulfilling prophecy, where purchases meant to get ahead of higher prices 
only inflame inflation.

   That's why so much scrutiny is on corporate profits. While the downside of a 
remarkably resilient U.S. economy is a diminished chance of rate cuts, the 
upside is that it should help prop up sales and earnings for businesses.

   That's helped growth in profits to broaden out to more kinds of companies, 
rather than just the Big Tech behemoths that dominated the market last year, 
according to David Lefkowitz, head of U.S. equities at UBS Global Wealth 
Management.

   Because of that, he's forecasting the S&P 500 could end the year around the 
5,200 level, which is roughly where it closed Thursday. He says the index could 
maybe even rise to 5,500 if inflation pressures ease more quickly or corporate 
profit growth is stronger than expected.

   On Wall Street, Wells Fargo slipped 0.4% after swinging between gains and 
losses through the day. It beat analysts' forecasts for overall earnings for 
the latest quarter. But its net interest income, a key component of bank 
profits, came up shy of forecasts.

   Citigroup fell 1.7% despite also reporting stronger-than-expected results, 
while State Street rose 2.5%.

   All told, the S&P 500 fell 75.65 points to 5,123.41. The Dow Jones 
Industrial Average dropped 475.84 to 37,983.24, and the Nasdaq composite sank 
267.10 to 16,175.09.

   Banks are leading off a reporting season where analysts are forecasting 
companies in the S&P 500 will deliver a third straight quarter of growth, 
according to FactSet. This upcoming week will feature reports from such big 
names as Bank of America, Johnson & Johnson and UnitedHealth Group.

   Federal Reserve Chair Jerome Powell will be speaking at a closely watched 
Q&A event on Tuesday with a governor from the Bank of Canada. Other Fed 
officials will also be giving remarks through the week that could sway traders' 
expectations for upcoming moves on interest rates and trigger Wall Street's 
next swings.

   ___

   AP Writers Matt Ott and Zimo Zhong contributed.

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