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Market Snapshot: Stocks close mostly lower as earnings season set to kick off

Stocks finish mostly lower as investors struggled to identify catalysts to drive the market ahead of the start of quarterly results on Friday. Read More...

The S&P 500 eked out gains Thursday but stocks closed mostly lower as investors struggled to identify catalysts to drive the market ahead of the unofficial start of the corporate earnings season Friday.

How did the benchmarks fare?

The Dow Jones Industrial Average DJIA, -0.05% fell 14.11 points to 26,143.05, the S&P 500 index SPX, +0.00% edged up 0.11 point to 2,888.32, and the Nasdaq Composite Index COMP, -0.21% dropped 16.88 points, or 0.2%, to 7,947.36.

What drove the market?

Investors are treading carefully ahead of a first-quarter earnings season that begins in earnest Friday, with reports due from two of the nation’s largest banks: JPMorgan Chase & Co. JPM, +0.84% and Wells Fargo & Co. WFC, -0.10% which could provide clues on the health of the U.S. economy and its banking sector.

With analysts projecting S&P 500 earnings to fall 4.2% year-over-year, market participants may be wary of making broad bets before getting a peek at first quarter results, and more important, hearing from management on their outlooks for the year ahead.

WFC, -0.10% Investors are also wrestling with growing signs of anemic growth throughout the world, which could deflate appetite for assets perceived as risky like stocks even as indexes hover near all-time highs.

Minutes from the Federal Reserve released Wednesday show that policy makers last month dropped plans for further rate increases in 2019 due to unease over the U.S. and global economies, though some members of the rate-setting Federal Open Market Committee didn’t rule out a rate increase toward the end of the year.

Despite worries about the future path of economic growth, the state of the U.S. labor market remains strong, as evidenced by a Thursday report showing that new applications for jobless benefits hit a 50-year low. The strength of the jobs market is often cited by stock-market bulls who argue the U.S. consumer-led economic expansion has more room to run.

Read: Guggenheim says next recession will be less severe — but the ensuing stock market fall will be brutal

Meanwhile, European Union leaders agreed to postpone Brexit until Oct. 31 to allow British Prime Minister Theresa May more time to try to get the U.K.’s Parliament to approve the country’s divorce deal.

What economic data and fed speakers were in focus?

New applications for jobless benefits fell to 196,000 in the week ended April 6, the lowest number in 50 years, the Labor Department said.

Wholesale prices rose 0.6% in March versus February, faster than the 0.3% increase expected by economists polled by MarketWatch. The Labor Department’s PPI index also showed that core wholesale prices, which strip out volatile food and energy prices, were flat for the month.

Federal Reserve Vice Chairman Richard Clarida, in a speech to the Institute of International Finance, said economic data show U.S. growth is “slowing somewhat,” while inflationary pressures have been “muted.”

St. Louis Fed President James Bullard told the Community Development Foundation of Tupelo, Mississippi that the campaign to “normalize” Fed interest rate policy “has been largely successful.”

What were strategists saying?

The strength in financial stocks ”has something to do with the Fed signaling that it doesn’t foresee any rate cuts this year,” a concern for banks whose earnings can be negatively impacted by low rates in the form of lower margins on loans, Lindsey Bell, an investment strategist at CFRA Research, told MarketWatch.

Despite good news on the labor market and U.S. China trade talks, the market remains rangebound following the S&P 500’s more-than 15% rally year-to-date, she added. “The market is trading at a premium to the historical average,” she said. “We see a little bit of upside from here for the rest of the year, but you’ll see volatility throughout the course of earnings season, for sure.”

“The minutes last night showed that some policy makers would be keen to hike rates should the economy improve, and that took some traders by surprise as they thought a rate hike in 2019 was off the table. In a way, it was typical of the Fed to give themselves some wiggle room,” wrote David Madden, market analyst at CMC Markets UK, in a daily research note.

Which stocks were in focus?

Financial stocks in general outperformed the broader market, with the sector finishing 0.6% higher, as measured by the Financial Select Sector SPDR Fund XLF, +0.60% versus the S&P 500, which finished virtually unchanged.

International Business Machines Inc. IBM, +0.53% shares rose 0.5% after Credit Suisse analyst Matthew Cabral initiated coverage of the company with a $173 price target and an outperform rating.

Tesla Inc. TSLA, -2.77% shares fell 2.8% after reports indicate that the electric-car marker and Panasonic Corp. were suspending plans to expand a gigafactory.

Shares of Bed Bath & Beyond Inc. BBBY, -8.76%  slumped 8.8% after it reported a big drop in sales, triggering concerns about the retailer’s efforts to improve its profitability.

Keurig Dr Pepper Inc. KDP, -4.24%  shares dropped 4.2% after an analyst Morgan Stanley downgraded the stock, warning that investors should pay attention to slower growth for its single-serve beverages.

How were other assets trading?

Markets in Asia closed mostly lower, with Hong Kong’s Hang Seng Index HSI, -0.93% falling 0.9%, while the Shanghai Composite Index SHCOMP, -1.60% lost 1.6%. However, Japan’s Nikkei 225 NIK, +0.11% edged up 0.1%. European stocks, meanwhile, were showing muted moves, with the Stoxx Europe 600 SXXP, +0.06% up 0.1%.

In commodities markets, the price of oil CLK9, -1.38% declined sharply after a monthly report from the International Energy Agency, as did gold futures GCM9, -1.39% which settled below $1,300. The U.S. dollar DXY, +0.27% meanwhile, edged higher.

—Mark DeCambre contributed to this article

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