U.S. stock index futures extended falls on Friday, as quarterly results from some major U.S. banks added to concerns that the Federal Reserve’s aggressive monetary policy tightening has started taking a toll on economic growth.
JPMorgan Chase & Co (JPM.N) set aside $1.4 billion in anticipation of a mild recession as it reported a better-than-expected quarterly profit on the back of strong performance at its trading unit. Shares of the bank fell 2.4% in premarket trading.
Bank of America Corp (BAC.N) was an outlier among big banks, rising 0.6% after reporting a better-than-expected fourth-quarter profit as rate hikes helped it charge more interest on loans to customers.
Earnings from big banks were viewed as a major test of the strength of corporate America in the backdrop of sharp interest rate hikes from the Federal Reserve to curb decades-high inflation.
Wall Street’s main indexes gained on Thursday after consumer prices fell for the first time in more than 2-1/2 years last month, fueling hopes for a sustained downward trend in inflation that could give the Fed room to scale down the size of its rate hikes.
Money market participants see a 90.6% chance the Fed will hike the benchmark rate by 25 basis points in February, but see the terminal rate at 4.9% by June after the December inflation print.
Hopes of a less hawkish monetary policy stance by the Federal Reserve have supported equities in 2023, with the tech-heavy Nasdaq (.IXIC) and the benchmark S&P 500 (.SPX) on track for their best weekly performance since November 2022.
Investors will also closely monitor University of Michigan’s consumer sentiment survey for January, while tracking comments from Minneapolis Fed President Neel Kashkari to assess the strength of the U.S. economy.
At 7:06 a.m. ET, Dow e-minis were down 85 points, or 0.25%, S&P 500 e-minis were down 14.25 points, or 0.36%, and Nasdaq 100 e-minis were down 58 points, or 0.5%.