Dow futures fall 200 points as investors digest bank earnings, economic data

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 205 points. S&P 500 futures shed 0.7% and Nasdaq 100 futures were down 0.9%.

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.

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.

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%.

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.

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.

Investors have rotated out of growth and into value stocks amid rising rate fears, which makes future profits — including from growth companies — look less attractive.

“Big Tech stocks are selling off so dramatically as a product of, ‘yes US rates are likely to go up further this year,’ but also as investors rotate into value and cyclical trades,” said Ed Moya, senior market analyst at Oanda. “Wall Street is trying to get a sense of how much growth is going to slow and the banks will start providing some insight on Friday,” he added.

A slew of economic data will also be released Friday, including December retail sales numbers. Economists are expecting the report to show a decline of 0.1%, according to estimates compiled by Dow Jones. During November, sales rose by 0.3%, slower than the 0.9% economists had been expecting.

Industrial production numbers will also be reported, with Wall Street expecting a 0.2% rise. Consumer sentiment figures will be released later Friday morning.

The reports come as investors closely watch all of the latest inflation readings.

The producer price index rose 0.2% month over month in December, which was lower than the 0.4% economists were expecting, the Labor Department said Thursday. The report followed Wednesday’s consumer price index reading, which jumped 7% year over year during December for the fastest annual rate since 1982.

“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.