LDN - Business

Futures drop after weak big bank earnings; inflation data in focus

[January 12, 2024] (Reuters) -U.S. stock index futures declined on Friday as weak earnings reports from big banks sparked worries about the health of corporate America, while investors awaited an inflation report during the day for clues on monetary policy outlook.

Bank of America shed 3.3% in premarket trading after its fourth-quarter profit shrank as the lender took $2.1 billion in combined charges to phase out a loan index and replenish FDIC's deposit insurance fund that was drained after some regional lenders collapsed last year.

JPMorgan Chase lost 2.6% as the lender's quarterly profit fell after setting aside nearly $3 billion to help refill the FDIC's fund.

Wells Fargo's profit jumped in the fourth quarter, helped by cost cuts. However, its shares were down 2.1%.

Citigroup fell 2.1% ahead of its earnings later in the day. A filing on Wednesday showed the lender booked about $3.8 billion in combined charges and reserves that will erode its fourth-quarter earnings.

The banking sector faced its worst turmoil since the 2008 financial crisis in March 2023, but finished the year with a 7% gain on hopes that the Federal Reserve could commence interest rate cuts in 2024.

Among other companies to report results, Dow component UnitedHealth fell 5.1% on higher-than-expected medical costs, though the health insurer reported upbeat fourth-quarter profit.

On the economic data front, investors are awaiting another inflation data, due at 8:30 a.m. ET, where economists polled by Reuters forecast the Producer Price Index (PPI) to tick up to 0.1% on a monthly basis in December from a flat reading the month before.

The data would come on the heels of Thursday's hotter-than-expected consumer inflation print, which dampened some hopes for an early start to the U.S. Federal Reserve's monetary policy easing cycle.

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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 9, 2024. REUTERS/Brendan McDermid/File Photo

Traders' expectations for an at least 25-basis-point rate cut in March currently stand at 69.5%, as per the CME Group's FedWatch Tool.

Investors will also parse comments by Minneapolis Fed President Neel Kashkari for any clues on the policy trajectory.

At 6:54 a.m. ET, Dow e-minis were down 245 points, or 0.65%, S&P 500 e-minis were down 21.25 points, or 0.44%, and Nasdaq 100 e-minis were down 78.75 points, or 0.46%.

BlackRock slipped 1.0% on plans to buy fund manager Global Infrastructure Partners (GIP) in a deal worth $12.5 billion. The asset manager also posted an 8% rise in quarterly profit.

Delta Air Lines fell 5.7% after the carrier scaled down its profit outlook for the current year, citing supply chain issues and macroeconomic uncertainties.

Among others, Tesla declined 3.2% after trimming prices of some new China models.

The electric-vehicle maker also said it will suspend most car production at its factory near Berlin, citing an impact due to shifts in transport routes because of attacks on vessels in the Red Sea.

Energy stocks such as Chevron, Exxon Mobil and Occidental Petroleum gained nearly 2% each, tracking higher crude prices.

(Reporting by Johann M Cherian and Ankika Biswas in Bengaluru; Editing by Shinjini Ganguli)

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