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Dow futures shed 200 points as JPMorgan shares fall, retail sales disappoint

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U.S. stock futures retreated during early morning trading on Friday, as investors sorted through earnings from the major banks.

Futures contracts tied to the Dow Jones Industrial Average slipped 260 points, or 0.7%. S&P 500 futures shed 0.7% and Nasdaq 100 futures were down nearly 0.8%.

Bank stocks, which had outperformed in recent weeks as interest rates moved higher, were split in premarket trading as their reports appeared to underwhelm investors despite strong headline numbers.

JPMorgan Chase, the No. 1 U.S. bank by assets, showed profit and revenue that topped estimates, but shares fell 4% in the premarket. The company’s earnings were helped by a large credit reserve release, and CFO Jeremy Barnum warned that the company would likely miss a key profit target in the next two years.

Citigroup’s stock fell 3% after the bank beat revenue estimates but showed a 26% decline in profits.

Meanwhile, shares of Wells Fargo rose 2% after the bank’s revenue topped expectations. CEO Charles Scharf said in a release that loan demand picked up in the second half of the year.

On the data front, retail sales were down 1.9% in December, a worse reading than the 0.1% expected by economists surveyed by Dow Jones.

Elsewhere, shares of paint maker Sherwin-Williams after the company warned that fourth-quarter earnings would miss estimates, citing issues in sourcing materials and staffing during the omicron surge.

Casino stocks were a bright spot on Friday morning. Las Vegas Sands surged 9.4% in premarket trading, while Wynn Resorts gained 8% and MGM Resorts International advanced 3.5%.

The jump came after Macau’s government announced it would allow just six casino licenses in the gambling hub. The companies rising Friday are among those that already are operating there.

Money-management behemoth BlackRock posted earnings that beat on bottom-line earnings but missed slightly on top-line revenue. Shares edged lower premarket, continuing a downward drift in 2022 that has seen BlackRock’s stock down more than 5%.

The early market action follows a day in which a slew of Federal Reserve speakers said they expect to start raising interest rates in March. Fed Governor Lael Brainard remarked during her Senate confirmation hearing that rates increases are coming, while Philadelphia Fed President Patrick Harker told CNBC that, “We need to take action on inflation,” and he sees at least three hikes in 2022.

All of the major averages slid during regular trading on Thursday. The Dow and S&P 500 fell 0.48% and 1.42%, respectively, registering the first down day in three. At one point the 30-stock benchmark had been up more than 200 points.

The Nasdaq Composite was the relative underperformer, shedding 2.51% and snapping a three-day winning streak as technology stocks came under pressure. Microsoft declined more than 4%, while Nvidia dipped 5%. Apple, Amazon, Meta, Netflix and Alphabet also closed lower.

Tech stocks fell sharply in the first week of the year as the Fed signaled a more aggressive approach to inflation, and this week’s early rally has now been reversed.

“There’s a thought that the pricing in of a more hawkish Fed is a process, and not a week. Although a lot got done last week, this is going to be a process, and I think we’re probably going to have more volatile days in tech and growth stocks in general this quarter,” said Alicia Levine, head of equities at BNY Mellon Wealth Management.

“The first quarter should be rising yields, rising rates, outperformance of cyclicals, and we think that the long-duration growth names are going to have a challenging quarter,” Levine added.

There is more economic data on tap for Friday. Industrial production numbers will also be reported, with Wall Street expecting a 0.2% rise. Consumer sentiment and business inventory figures will be released later Friday morning.

The reports come as investors closely watch all of the latest inflation readings. Readings for the producer price index and the consumer price index showed historic year-over-year gains this week but came in lower than some experts feared.

“Economic growth will remain strong, and fears about inflation and the Fed will cool from a boil to a simmer,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company. “Supply chains and the labor market are going to catch up and that will essentially kill two birds with one stone,” he added.

With Thursday’s move lower, the major averages are now in negative territory for the week. The Dow and S&P are on track for their second straight negative week, while the Nasdaq is on track for a third week of losses.

Fed’s Harker calls for ‘action on inflation,’ sees 3 or 4 rate hikes likely this year

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