LDN - Business

Oil slide dents futures as bank earnings get underway

[April 15, 2020] By Medha Singh

(Reuters) - U.S. stock index futures retreated on Wednesday as another batch of dismal first-quarter earnings reports and a slide in oil prices lent credence to forecasts for the biggest economic slump since the 1930s.

Bank of America <BAC.N> fell 2.7% in premarket trading as it joined JPMorgan Chase & Co <JPM.N> and Wells Fargo & Co <WFC.N> in reporting a plunge in quarterly profit and setting aside billions for potential loan losses tied to the coronavirus pandemic.

Goldman Sachs Group Inc <GS.N> also set aside nearly $1 billion to meet future loan defaults, while Citigroup Inc's <C.N> loan loss reserve grew to nearly $5 billion. Their shares dropped 1.8% and 2.9%, respectively.

With the outbreak crushing business activity, analysts expect earnings for S&P 500 firms to slide 12.3% in the first quarter, while the International Monetary Fund has predicted the global economy would shrink 3% in 2020, its sharpest downturn since the Great Depression.

"Stocks have enjoyed a decent rebound over the last month so perhaps we're seeing a little risk now being taken off the table as the economic reality of the situation starts to hit home," said Craig Erlam, senior market analyst, OANDA.

The benchmark S&P 500 <.SPX> has climbed about 30% from its March trough, lifted by a raft of U.S. monetary and fiscal stimulus and on early signs that coronavirus cases were peaking in some hotspots, but the index is still down about 16% from its record high.

The index jumped 3% on Tuesday on hopes the Trump administration could move to ease lockdowns. However, hotspot New York later sharply raised its official virus death toll to more than 10,000.

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The New York Stock Exchange (NYSE) is seen in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, New York, U.S., April 13, 2020. REUTERS/Andrew Kelly

J.C. Penney Co Inc <JCP.N> slumped 15% as sources said the retailer was exploring filing for bankruptcy protection after the virus outbreak upended its turnaround plans.

UnitedHealth Group Inc <UNH.N>, the biggest U.S. health insurer, reported a fall in quarterly profit, but its shares rose 2.6% in premarket trading as it maintained its 2020 profit outlook at a time when major companies have withdrawn forecasts due to the coronavirus pandemic.

Oil majors Exxon Mobil Corp <XOM.N> and Chevron Corp <CVX.N> slipped about 3% as oil prices tumbled after reports suggested persistent oversupply and collapsing global demand. [O/R]

At 7:37 a.m. ET, Dow e-minis <1YMcv1> were down 350 points, or 1.47%, S&P 500 e-minis <EScv1> were down 48.25 points, or 1.7% and Nasdaq 100 e-minis <NQcv1> were down 81.25 points, or 0.93%.

In a bright spot, carriers American Airlines Group Inc <AAL.O> and United Airlines Holdings Inc <UAL.O> jumped between 7% and 9% as the U.S. Treasury Department said major passenger airlines had agreed in principle to a $25 billion rescue package.

On the economic front, a Commerce Department report due at 8:30 a.m. ET is expected to show a record drop in U.S. retail sales in March, while another report is likely to show a fall in industrial production last month.

(Reporting by Medha Singh and Akanksha Rana in Bengaluru; Editing by Sagarika Jaisinghani and Shounak Dasgupta)

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