Futures tied to the S&P 500 and the Dow pared losses on Friday as resilient earnings from big U.S. banks helped assuage fears of further stress in the sector after the failure of two mid-sized lenders last month sparked concerns about a potential recession.
Wells Fargo & Co and JPMorgan Chase & Co reported a rise in first-quarter profits on the back of higher interest rates and their shares were up 1.0% and 4.5%, respectively.
BlackRock Inc’s quarterly profit also beat analysts’ estimates as investors continued to pour money in the world’s largest asset manager’s various funds. The stock was up 1.1% in thin volumes.
“Early bank earnings numbers are suggesting that U.S. finance houses have so far managed to weather the impact of the Fed’s tighter monetary policy and are posting results that are proving better than forecast,” Equiti Capital economist Stuart Cole said.
“However, markets will likely be scrutinizing balance sheets closely to ascertain exposure to troubled sectors such as commercial and retail real estate, which continue to suffer from post-Covid working pattern changes and higher financing costs.”
Data on Wednesday showed the Federal Reserve’s lending to banks eased further in the latest week, signaling that while the absolute levels of emergency credit remain high, financial sector strains are continuing to ease.
The S&P 500 banks index has lagged the broader S&P 500 this year with a 13% decline, while the KBW Regional Banking index has already lost 20% in its worst performance since 2009.
Regional bank PNC Financial Services Group Inc rose 3.8% after its quarterly earnings.
The S&P 500 and the Dow Jones Industrial closed at almost two-month highs on Thursday as economic data showed cooling inflation and a loosening labor market, fueling optimism that the Fed could be nearing the end of its aggressive interest rate-hike cycle.
Adding to the narrative, Atlanta Fed President Raphael Bostic on Friday said another 25-basis point rate hike can allow the U.S. central bank to end its tightening cycle with some confidence that inflation will steadily return to the 2% target.
Investors will keep an eye out for comments from Fed Board Governor Christopher Waller on economic outlook later in the day.
Data on Friday is expected to show retail sales slipped 0.4% in March, on a month-over-month basis, likely maintaining the pace of decline in February. The University of Michigan’s consumer sentiment index for April is also due later in the day.
Among other big-ticket earnings, healthcare conglomerate UnitedHealth Group Inc beat estimates for quarterly profit and raised its annual forecast, pushing its shares up 0.7%.
At 7:00 a.m. ET, Dow e-minis were down 9 points, or 0.03%, S&P 500 e-minis were down 4 points, or 0.10%, and Nasdaq 100 e-minis were down 68.75 points, or 0.52%.
Boeing Co fell 5.9% after the planemaker halted deliveries of some 737 MAXs due to a supplier quality problem by Spirit AeroSystems.
Spirit AeroSystems’ shares tumbled 11.8%.
Lucid Group Inc dropped 6.8% after the luxury electric-car maker reported first-quarter production and delivery figures that were lower than the preceding three months.
(Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta)