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Futures subdued as focus shifts to results from big U.S. banks

2023-01-13T11:02:11Z

Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly

U.S. stock index futures were muted on Friday ahead of results from big U.S. banks that will kick off the quarterly earnings season and provide more clues on the strength of corporate America.

JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) are forecast to report lower fourth-quarter profits before the opening bell, as they stockpile funds to prepare for an economic slowdown.

With the Federal Reserve’s aggressive tightening campaign to combat inflation, higher borrowing costs have prompted consumers and businesses to curb their spending, impacting banks’ profits as demand for credit slows.

“Bank earnings are going to be a big test,” said Michael Hewson, chief market analyst at CMC Markets UK.

“It will be interesting to see whether they (banks) have made any further provisions for non-performing loans, how they see demand for loans.”

Wall Street’s main indexes gained on Thursday after consumer prices fell for the first time in more than 2-1/2 years in December, fueling hopes of a sustained downward trend in inflation.

The tech-heavy Nasdaq (.IXIC) and the benchmark S&P 500 (.SPX) are on track for their best weekly performance since November 2022.

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 CPI print.

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.

Delta Air Lines Inc (DAL.N), BlackRock Inc (BLK.N) and UnitedHealth Group Inc (UNH.N) are also scheduled to report fourth-quarter earnings on Friday.

At 5:37 a.m. ET, Dow e-minis were up 10 points, or 0.03%, S&P 500 e-minis were down 0.5 points, or 0.01%, and Nasdaq 100 e-minis were down 16.5 points, or 0.14%.

Tesla Inc (TSLA.O) fell 4% in premarket trading after slashing prices on its electric vehicles in the U.S. and Europe by as much as 20% after missing 2022 deliveries estimates.

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