Wall Street slides as earning season starts with profit drop for big banks

US stocks fell on Friday as the earning season started with a drop in profit for big banks, with the main indexes quickly giving up an initial bounce after Russia signaled an end to its military mobilization.

JPMorgan Chase & Co, Morgan Stanley, Citigroup Inc and Wells Fargo & Co reported a slide in net income as choppy markets hurt investment banking activity and lenders set aside more funds to cover loan defaults.

JPMorgan, however, beat market expectations for profit and along with UnitedHealth Group Inc, which raised its annual profit forecast, limited declines on the blue-chip Dow . The investment bank was up 2.87% and UnitedHealth 2.95%.

Analysts now expect profit for S&P 500 companies to have risen just 3.6% from a year ago, much lower than an 11.1% increase expected at the start of July, according to Refinitiv data.

"JPM is a beneficiary of these higher rates on their loan books, Wells Fargo would have had the same positive result but they've decided to boost their loan reserves and improve on capital adequacy ratios," said Siddharth Singhai, chief investment officer at Ironhold Capital in New York.

"I don't believe there's anything that has changed significantly when it comes to the fundamental economics of banking. Short-term differential will close out eventually." Market participants are closely tracking the earnings season for any impact on corporate profit from higher prices and the Federal Reserve's aggressive rate hikes.

Meanwhile, tensions around the Ukraine invasion eased a bit after Russian President Vladimir Putin said the "partial mobilization" announced last month would be over within two weeks.

At 10:42 a.m. ET, the Dow Jones Industrial Average was down 191.91 points, or 0.64%, at 29,846.81, the S&P 500 was down 47.10 points, or 1.28%, at 3,622.81, and the Nasdaq Composite was down 174.31 points, or 1.64%, at 10,474.84.

The energy sector index fell 2%, tracking a drop in crude oil prices.

At the end of a week that saw high inflation readings cementing the bets in favor of a 75 basis points hike in Fed fund rates in November, the Nasdaq and S&P 500 were set for weekly declines, while the Dow tracked small weekly gains.

Kroger Co dropped 2.60% after the supermarket chain said on Friday it would buy smaller rival Albertsons Companies Inc in a $24.6 billion deal.

Investor also tracked UK politics after British Prime Minister Liz Truss fired her finance minister Kwasi Kwarteng and scrapped parts of their economic package in a desperate bid to stay in power and survive the market and political turmoil.

Declining issues outnumbered advancers for a 2.29-to-1 ratio on the NYSE and for a 1.88-to-1 ratio on the Nasdaq.

The S&P index recorded five new 52-week highs and three new lows, while the Nasdaq recorded 47 new highs and 66 new lows.