Wall Street lost ground Friday as a barrage of soft economic data appeared to affirm another interest rate hike from the Federal Reserve, dampening investor enthusiasm after a series of big U.S. bank earnings launched first-quarter reporting season.

All three major U.S. stock indexes were in the red, but coming on the heels of Thursday's robust rally, the S&P 500 and the Dow remained on track for weekly gains.

High Bar

"Yesterday we saw one of the strongest rallies heading into earnings season in quite some time, so there was a really high bar for stocks to continue that rally," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.

Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. beat earnings expectations, benefiting from rising interest rates and easing fears of stress in the banking system.

"As expected, the bigger banks were probably not harmed that much by the regional banking turmoil, and possibly even beneficiaries of it," Mayfield added. "We saw mostly strong and healthy balance sheets, and it's pretty clear (the regional banking) crisis isn't systemic."

The S&P 500 banking sector jumped 3.4% and JPMorgan Chase surged 7.3%, setting itself up for its biggest one-day percentage gain since Nov. 9, 2020.

Citigroup advanced 5.0% while Wells Fargo edged 0.1% higher.

Mixed Signals

But a slew of mixed economic data including retail sales, industrial production and consumer sentiment cemented expectations that the Fed will hike rates another 25 basis points at next month's policy meeting.

Those expectations were underscored by Atlanta Fed President Raphael Bostic, who said another 25 basis point hike could allow the Fed to end its tightening cycle, even as Chicago Fed President Austan Goolsbee called for the central bank to be prudent.

At last glance, financial markets have priced in an 80% likelihood of that happening, according to CME's FedWatch tool.

At 2:03 p.m. ET, the Dow Jones Industrial Average fell 245.05 points, or 0.72%, to 33,784.64; the S&P 500 lost 25.64 points, or 0.62%, at 4,120.58; and the Nasdaq Composite dropped 109.03 points, or 0.9%, to 12,057.24.

Among the 11 major sectors of the S&P 500, financials were the sole gainers.

First-quarter earnings season hits full stride next week, with reports expected from a number of high profile companies including Goldman Sachs Group Inc., Morgan Stanley, Bank of America Corp., Netflix Inc. and a long list of regional banks and industrials.

Analysts have lowered expectations, forecasting aggregate S&P 500 earnings having fallen by 4.8% from a year ago, a reversal of the 1.4% year-on-year gain seen at the beginning of the quarter.

BlackRock Inc. rose 2.8% after the world's largest asset manager beat quarterly profit expectations.

Boeing Co. slid 6.3% after the planemaker halted deliveries of some 737 MAXs due to a supplier quality problem attributed to Spirit AeroSystems.

Spirit AeroSystems' shares swooned, falling 20.5%.

Shares of Lucid Group Inc. dropped 7.6% following the luxury electric automaker's disappointing first-quarter production and delivery numbers.

Declining issues outnumbered advancers on the NYSE by a 3.01-to-1 ratio; on Nasdaq, a 2.58-to-1 ratio favored decliners.

The S&P 500 posted nine new 52-week highs and two new lows; the Nasdaq Composite recorded 37 new highs and 182 new lows.