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JPMorgan Chase ( JPM ) falls on NII forecast miss

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Wells Fargo Citigroup down after lower Q1 profits

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U.S. Steel dips after shareholders approve Nippon Steel ( NISTF )

merger

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Indexes down: Dow 1.17%, S&P 1.36%, Nasdaq 1.57%

(Updates to 14:11 EDT)

By Stephen Culp

NEW YORK, April 12 (Reuters) - Wall Street turned

sharply lower on Friday after major U.S. banks reported mixed

results, capping a week marked by market-moving inflation data,

evolving expectations for U.S. Federal Reserve policy, and

looming geopolitical tensions.

All three major indexes fell more than 1%, on track to notch

losses on the week.

"Diminishing risk appetite is the over-arching theme heading

into the weekend for a bunch of reasons," said Peter Tuz,

president of Chase Investment Counsel in Charlottesville,

Virginia. "On top of the bank earnings, you've got a

geopolitical scare going into the weekend."

Results from a trio of big banks marked the unofficial

launch of first-quarter earnings season.

JPMorgan Chase & Co ( JPM ), the biggest U.S. bank by

assets, posted a 6% profit increase but its net interest income

forecast fell short of expectations. Its shares slid 5.5%.

Wells Fargo & Co's ( WFC ) stock fell modestly after the

company reported a 7% decline in profit as net interest income

dropped due to weak borrowing demand.

Citigroup ( C/PN ) posted a loss after spending on employee

severance and deposit insurance. Its shares slipped 2.1%.

Economic data this week, particularly Wednesday's

hotter-than-expected CPI report, has suggested that inflation

could be stickier than previously thought, prompting investors

to reset expectations about the timing and extent of the U.S.

Federal Reserve's rate cuts this year.

"As inflation data comes out it indicates that the timing of

rate cuts is probably being pushed a little further out," Tuz

added.

Boston Fed President Susan Collins said she expects a couple

of interest-rate cuts this year, even though it could take

inflation some time to return to its targeted level.

Austan Goolsbee, president of the Chicago Fed, said he

remains focused on the Personal Consumption Expenditures (PCE)

report due on April 26 for a clearer picture of inflation's

progress toward the central bank's target.

Geopolitical tensions continue to simmer as Iran threatened

to take revenge on Israel for the April 1 airstrike on its

embassy in Damascus, adding momentum to the sell-off.

The CBOE Volatility Index, a measure of investor

anxiety, hit its highest level since October 2023.

At 2:11 p.m. ET, the Dow Jones Industrial Average

fell 449.66 points, or 1.17%, to 38,009.42. The S&P 500

lost 70.69 points, or 1.36%, at 5,128.37 and the Nasdaq

Composite dropped 258.53 points, or 1.57%, to 16,183.67.

All 11 major sectors in the S&P 500 were in the red, with

materials suffering the steepest percentage loss.

Advanced Micro Devices ( AMD ) and Intel ( INTC ) both fell

more than 4% after a report that Chinese officials told the

country's largest telecom firm earlier this year to phase out

foreign chips by 2027.

U.S. Steel slid 2.4 after shareholders voted to

approve a proposed merger with Nippon Steel Corporation ( NISTF )

.

Declining issues outnumbered advancers on the NYSE by a

3.85-to-1 ratio; on Nasdaq, a 3.18-to-1 ratio favored decliners.

The S&P 500 posted 12 new 52-week highs and nine new lows;

the Nasdaq Composite recorded 34 new highs and 166 new lows.