Dow futures fall greater than 250 factors as financial institution shares fall on recession fears

The stock market was expected to end a successful week on a bad note as JPMorgan Chase led bank stocks down after warning that a recession was the base case for the year.

Futures linked to the Dow Jones Industrial Average fell 282 points, or 0.8%, while S&P 500 futures fell 1%. Nasdaq 100 futures fell 1.1%.

JPMorgan Chase posted earnings that beat expectations, but the bank cautioned against setting aside more money to cover loan losses as a “mild recession” is its “key case.” The bank reported a provision for loan losses of $2.3 billion in the quarter, a 49% increase from the third quarter. The stock fell more than 2%.

Wells Fargo shares fell 2% after the bank released its earnings results. Bank of America was also down 2% premarket despite reporting better-than-expected earnings for the fourth quarter.

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

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

“As the analyst tug-of-war over the prospects for a recession — and the depth of a recession — heats up, banks’ earnings reports, along with their forecasts, should help clarify how businesses and consumers are faring,” said Quincy Krosby, LPL Financial’s Chief Global Strategist.

The moves followed a positive day for the three major indices. The Nasdaq Composite grabbed its fifth day of gains for the first time since July. Stocks across the board rose as the December CPI report showed prices down 0.1% from November. While prices rose 6.5% year-on-year, the results fueled hopes that the US Federal Reserve may soon be slowing its rate hike.

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

Stocks are headed for a successful week, with the Nasdaq and S&P on course for their best weekly performance since November. The Nasdaq was up 4.09% by the close on Thursday. The S&P is up 2.26% while the Dow is up 1.66%.