The stock market was set to end a winning week on a sour note as JPMorgan Chase led a decline in bank shares after it warned a recession was its base case for the year.
The Dow Jones Industrial Average fell 303 points, or 0.9%, on Friday morning, while the S&P 500 slid 1%. The Nasdaq Composite dropped 1.1% and was on pace to snap a five-day win streak.
JPMorgan Chase posted revenue that beat expectations, but the bank warned it was setting aside more money to cover credit losses because a “mild recession” is its “central case.” The bank posted a $2.3 billion provision for credit losses in the quarter, a 49% increase from the third quarter. The stock fell more than 2%.
Wells Fargo shares fell 2% after the bank reported its quarterly figures. Bank of America also fell 2% premarket despite reporting better-than-expected earnings for the fourth quarter.
Delta Air Lines also reported earnings and revenue that beat estimates for the final quarter of 2022. However, the stock slid more than 5% in the premarket.
Investors have been awaiting these results to gain more insight into the health of the economy.
“As the tug-of-war among analysts intensifies around the prospects for a recession — and the depth of a recession — the earnings reports from the banks, coupled with their guidance, should help clarify how businesses and consumers are managing,” said Quincy Krosby, LPL Financial’s chief global strategist.