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S&P 500, Nasdaq fall Thursday, notch weekly losses as investors assess earnings, inflation

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The S&P 500 declined Thursday, on track for a losing week as investors digested mixed earnings results from major banks and rising inflation.

The broad-market index dropped 0.8%, while the Nasdaq Composite lost more than 1.5%. Meanwhile, the Dow Jones Industrial Average was flat.

The S&P 500 is down 1.9% for the week on inflation fears as a Tuesday CPI report showed price increases not seen since 1981. The Nasdaq Composite is off by 3.4% and the Dow is little changed for the week. Trading is closed at the NYSE on Friday.

Those moves come as major banks including Goldman Sachs, Morgan Stanley and Wells Fargo posted their first-quarter earnings on Thursday. Investors are watching how the banks navigated surging inflation and a recession warning from the bond market in the form of a flattening yield curve, as earnings season goes into full swing next week.

“We’re seeing the market digest a mixed bag of earnings,” said Adam Sarhan, founder and CEO at 50 Park Investments. “We’re still very early in earnings season, so we still have a lot more numbers to digest, but for now, the market is doing its best to stabilize after a great big sell off.”

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Goldman Sachs‘ stock price dipped 0.5%, after gaining earlier on a first-quarter earnings beat. The bank reported per-share earnings of $10.76 on $12.93 billion in revenue. Analysts polled by Refinitiv expected per-share earnings of $8.89 on revenue of $11.83 billion.

Shares of Morgan Stanley popped about 1% after the bank posted better-than-expected earnings. The firm earned $2.02 per share on revenue of $14.8 billion. Analysts expected $1.68 in per-share earnings and revenue of $14.2 billion, according to Refinitiv. The bank generated stronger revenues from equity and fixed-income trading than expected.

Citigroup‘s shares jumped 1% after the company topped earnings estimates. The firm reported $2.02 per diluted share, versus the Refinitiv estimate of $1.55 a share. It also gained $19.19 billion, compared to the Refinitiv estimate of $18.15 billion.

On the other hand, shares for Wells Fargo dropped more than 5% Thursday after the bank posted first-quarter revenue that fell short of analyst estimates and said credit losses were likely to increase.

U.S. Bancorp and Ally Financial also reported earnings Thursday.

“The bar is low for bank earnings with expectations for Q1 earnings declining about 1%,” said Stephanie Lang, chief investment officer at Homrich Berg. “Beating this low bar could move shares higher with the bright spot being net interest income as interest rates have moved higher.”

Elsewhere in the market, Twitter shares advanced about 1% after Elon Musk offered to buy the social media company for $54.20 a share. Musk said this was his best and final offer for Twitter, which he said needs to be transformed privately in order to thrive. At the same time, Tesla shares dipped more than 3%.

Multiple focal points for investors

Earnings weren’t the only thing on investors’ minds this week. Inflation took center stage as March’s consumer price index rose by 8.5% from a year ago, the fastest annual gain since December 1981 — and higher than the Dow Jones estimate for 8.4%.

Supplier prices were also hotter than expected for March, gaining 11.2% from a year ago and marking the biggest gain on record going back to 2010.

On Thursday, the benchmark 10-year U.S. Treasury yield rose back to multiyear highs as traders continued to assess rising inflation. The yield on the 10-year climbed about 12 basis points to top 2.8%.

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Rising prices spurred further speculation on how the central bank might respond. Federal Reserve board member Christopher Waller said on CNBC’s “Closing Bell” Wednesday that he expects interest rates to rise considerably over the next few months.

“I think the data has come in exactly to support that step of policy action if the committee chooses to do so, and gives us the basis for doing it,” he said. “I prefer a front-loading approach, so a 50-basis-point hike in May would be consistent with that, and possibly more in June and July.”

For now, investors are weighing the hot inflation data, the Fed’s next steps and first-quarter earnings as they decide how to proceed.

Retail sales figures for March slightly missed analyst expectations with a 0.5% gain, according to the U.S. Census Bureau. That’s compared to the 0.6% consensus estimate from Dow Jones.

Jobless claims jumped 185,000 for the week ending April 9, according to data from the Labor Department.

Notable companies issuing earnings next week

Earnings season will hit its stride next week, as seven Dow blue-chip names report next week: IBM, Procter & Gamble, Travelers, Dow Inc, Johnson & Johnson, American Express and Verizon. Netflix reports Tuesday and Tesla reports Wednesday, both after the bell.

Bank earnings will continue to roll in with Bank of America and Bank of NY Mellon both reporting Monday. Transportation companies will also release their numbers, including trucking firms Knight-Swift and J.B. Hunt.

United Airlines, American Airlines and Alaska Air Group are also on the calendar as are railroads CSX and Union Pacific.

CNBC’s Patti Domm and Hugh Son contributed reporting.

Correction: Wells Fargo decreased its allowance for credit losses by $1.1 billion. An earlier version said it had set aside more money for credit losses.

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