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

Our base case is for banks to 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 a recession was its base case for the year.

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

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

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

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

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

“As the tug-of-war among analysts intensifies around the prospects for a recession — and the depth of a recession — the earnings reports from the banks, coupled with their guidance, should help clarify how businesses and consumers are managing,” said Quincy Krosby, LPL Financial’s chief global strategist.

The moves followed a positive day for the three major indexes. The Nasdaq Composite snatched its fifth day of gains — a first since July. Stocks rose broadly as December’s CPI report showed prices declined 0.1% over November. While prices rose at a 6.5% pace compared to the previous year, the results heightened hopes that the Federal Reserve may soon slow its hiking.

The Dow Jones Industrial Average added 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 winning week, with the Nasdaq and S&P on pace for their best weekly performance since November. The Nasdaq is up 4.09% through Thursday’s close. The S&P has advanced 2.26%, while the Dow has added 1.66%.