By Bansari Mayur Kamdar, Shreyashi Sanyal and Sinéad Carew

(Reuters) -Wall Street’s main indexes fell on Friday with the biggest drag from the financial sector as investors were disappointed by financial results from big U.S. banks, which cast a shadow over the fourth-quarter’s earnings season kick-off.

Ten of the 11 major S&P 500 sectors were lower in afternoon trading, with financials falling 1.6%. The S&P 500 banks index slid 2% after hitting an intraday high in the previous session.

JPMorgan Chase & Co tumbled 6.3% on reporting weaker performance at its trading arm. The bellwether lender also warned that soaring inflation, looming threat of Omicron and trading revenues returning to normal levels are set to challenge the banking industry’s growth in the coming months.

Citigroup Inc was down 1.8% after posting a 26% drop in fourth-quarter profit, while asset manager BlackRock Inc fell 2.5% after missing quarterly revenue expectations.

“Today’s first earnings from the banks came in with varying cross currents. The major theme was loan demand is still not strong enough to outpace deposit growth which means banks aren’t in a position to take advantage of the steeper yield curve,” said Keith Buchanan, portfolio manager at Globalt in Atlanta.

Financials have outperformed the broader S&P 500 index recently on bets that the Federal Reserve’s expected interest rate hikes would boost their profits.

And along with data showing December’s retail sales decline, Buchanan said, the banks’ performance prompts questions about the economic outlook for the current quarter and 2022.

“The question is, does the economy have enough strength to get through the risk Omicron brings as fiscal and monetary stimulus is rolling off,” he said.

Retail sales dropped 1.9% last month due to shortages of goods and an explosion of COVID-19 infections. Separate data showed soaring inflation hit U.S. consumer sentiment in January, pushing it to its second lowest level in a decade.

By 2:27 p.m. ET (1927 GMT), the Dow Jones Industrial Average fell 370.49 points, or 1.03%, to 35,743.13, the S&P 500 lost 23.98 points, or 0.51%, to 4,635.05 and the Nasdaq Composite dropped 31.26 points, or 0.21%, to 14,775.56.

After financials consumer discretionary and healthcare were also big drags on the S&P.

Analysts see S&P 500 companies earnings rising 23.1% in the fourth quarter, according to IBES data from Refinitiv.

One bright spot in the bank sector on Friday however was Wells Fargo & Co, which gained 3.3% after posting a bigger-than-expected rise in fourth-quarter profit.

Casino operators Las Vegas Sands rose 11% while Melco Resorts advanced 14% and Wynn Resorts was up almost 8% after Macau’s government capped the number of new casino operators allowed to operate to six with an operating period of up to 10 years.

U.S. stock markets are due to remain shut on Monday for the public holiday in honor of Martin Luther King.

Declining issues outnumbered advancing ones on the NYSE by a 2.92-to-1 ratio; on Nasdaq, a 2.37-to-1 ratio favored decliners.

The S&P 500 posted 25 new 52-week highs and three new lows; the Nasdaq Composite recorded 47 new highs and 562 new lows.

(Reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in Bengaluru, Sinéad Carew in New York, Editing by Maju SamuelEditing by Marguerita Choy)