U.S. stocks fell Friday following lackluster earnings reports from some of the country’s biggest banks and weaker-than-expected economic data, deepening a winter selloff.

All three major indexes opened Friday lower, briefly recovered from their early-session lows, then fell again. The S&P 500 was recently down 0.7%, while the Dow Jones Industrial Average was off 1.1%. The tech-heavy Nasdaq Composite retreated from earlier gains, losing 0.7%.

Stock futures started heading lower before the market’s open. JPMorgan Chase and Citigroup kicked off the latest quarterly earnings report season by disclosing double-digit percentage drops in profit ahead of the opening bell. Shares of those banks started moving lower, followed by scores of other financial stocks.

That was followed by weak economic data, reigniting concerns about the economy’s ability to fend off inflation and what that means for the Federal Reserve’s fiscal-tightening plan. Retail sales dropped by 1.9% in December, while industrial production dipped slightly for the first time in three months.

“The retail sales number was ugly, there’s no getting around it,” said Cliff Hodge, chief investment officer for Cornerstone Wealth. “It’s tough to say how much of the miss is related to inflation impacts, Omicron, or the roll-off of government benefits, but combined with some disappointing bank earnings this morning, the markets are likely in for a bit of a tough slog.”

The losses put all three indexes on track for another week of losses. The S&P 500 and Dow are down 1% and 1.2%, respectively, over the last five days, on pace for a second straight weekly decline. The Nasdaq, off 1.3%, is on track for its third consecutive week in the red.

Financial stocks broadly fell, shedding 1.4%. Shares of JPMorgan Chase slid 5.4%, and Citigroup dropped 2.3% after both banks posted declines in quarterly profit. Wells Fargo added 4.2% after the bank reported that profit soared 86% in the final three months of 2021.

BlackRock posted higher quarterly profit, and market gains lifted the investment firm’s assets under management above $10 trillion. Despite that, its shares edged down 2.7%. 

Manufacturers, material firms and consumer discretionary stocks were also down at least 1.2% following the economic data. Besides that, Sherwin-Williams declined 3.7% after the paint maker lowered its guidance, citing a shortage of raw materials amid supply-chain and labor constraints.

Some light buying of large-cap growth stocks gave the market, and the Nasdaq, some support, as investors returned to a trade that tends to work well during periods of economic uncertainty. Facebook parent Meta Platforms and Microsoft added 0.7% each. Alphabet gained 0.4%.

Energy stocks jumped 1.4%, getting a fresh boost from a climb in oil prices.

Casino stocks including Las Vegas Sands and Wynn Resorts jumped after Macau released a draft law that would cut the tenure for new casino licenses in half, but wouldn’t reduce the number of licenses. Las Vegas Sands added 13%, and Wynn Resorts gained 7.2%. 

The U.S. dollar last year saw its largest increase in value since 2015. That is good for many American consumers, but it could also put a dent in stocks and the U.S. economy. WSJ’s Dion Rabouin explains. Photo illustration: Sebastian Vega/WSJ

Meanwhile, bond yields resumed their climb. Expectations for an interest-rate rise as soon as March have caused some investors to sell government bonds, pushing up yields. The yield on the benchmark 10-year Treasury note ticked up to 1.746% Friday, from 1.708% Thursday.

“Equity markets will continue to take their cues from the bond market,” said Hugh Gimber, a strategist at J.P. Morgan Asset Management. “What’s becoming clear is the Fed is realizing that inflationary pressures are larger and more broad-based than they previously expected.”

Rising yields have motivated investors to rotate out of technology stocks.

Photo: Courtney Crow/Associated Press

Cryptocurrency dogecoin jumped 12% from its 5 p.m. ET level Thursday after Elon Musk said Tesla was accepting payment for some merchandise with the currency, which was originally started as a joke. Bitcoin was recently down less than 1%.

Overseas, the pan-continental Stoxx Europe 600 fell 0.9%. EDF’s shares dropped 15.4% in Paris trading after France blocked the utility company from fully passing on soaring energy prices to consumers.

South Korea’s central bank raised interest rates to pre-pandemic levels to fight inflation, and signaled that more increases could come this year. The country’s benchmark Kospi index declined 1.4%.

Other major Asian stock indexes also closed lower. China’s Shanghai Composite fell 1%, and Japan’s Nikkei 225 shed 1.3%. 

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Michael Wursthorn at michael.wursthorn@wsj.com

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