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Dow futures fall more than 200 points as bank stocks fall on recession fears

Our basis is that the banks should be up 50% this year, says Wells Fargo's Mike Mayo

The stock market was set to end a winning week on a sour note as JPMorgan Chase led a decline in bank shares after it warned that a recession was key for the year.

Futures tied to the Dow Jones Industrial Average fell 200 points, or 0.8%, while S&P 500 futures fell 0.9%. Nasdaq 100 futures fell 1 percent.

JPMorgan Chase posted earnings that beat expectations, but the bank warned that it is setting aside more money to cover credit losses because a “mild recession” is its “core issue”. The bank posted a $2.3 billion provision for credit losses in the quarter, up 49% from the third quarter. The stock fell more than 2 percent.

Wells Fargo shares fell 2% after the bank reported its quarterly numbers. Bank of America also fell 2% premarket despite reporting better-than-expected fourth-quarter earnings.

Delta Air Lines also reported earnings and revenue that beat estimates for the final quarter of 2022. However, the stock fell more than 5% in premarket trading.

Investors have been waiting for these results to gain more insight into the health of the economy.

“As the tug of war among analysts intensifies over the prospect of a recession — and the depth of one — the earnings reports from banks, combined with their guidance, should help clarify how businesses and consumers are faring,” said Quincy Krosby, LPL Financial’s global strategist.

The moves followed a positive day for the three major indices. The Nasdaq Composite snapped its fifth day of gains – a first since July. Shares rose broadly as December’s CPI report showed prices fell 0.1% during November. While prices rose 6.5% from a year earlier, the results raised hopes that the Federal Reserve may soon slow the rise.

The Dow Jones Industrial Average added 216.96 points, or 0.64%. The S&P 500 and Nasdaq Composite rose 0.34% and 0.64% respectively.

Stocks are heading for a winning week, with the Nasdaq and S&P on pace for their best weekly results since November. The Nasdaq is up 4.09% through Thursday’s closing time. The S&P has advanced 2.26%, while the Dow has added 1.66%.

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