Dow Slides as Recession Fears Rise, Wall Street Bank Earnings Loom—and What Else Is Happening in the Stock Market Today

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Some of Wall Street’s biggest banks kick off earnings season on Thursday.

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Stocks dropped on Thursday as investors continued to fret over inflation and the risk of recession, while earnings from Wall Street banks loomed later in the day.

Futures for the Dow Jones Industrial Average retreated 310 points, or 1%, after the index lost 208 points on Wednesday to close at 30,772. S&P 500 futures signaled a start 1.1% into the red with the tech stock-heavy Nasdaq poised to slide 1.2%.

Overseas, the pan-European Stoxx 600 fell 0.8% and Hong Kong’s Hang Seng Index ended 0.2% lower.

Inflation data on Wednesday ushered in a return of recession fears after the U.S. consumer price index (CPI) for June climbed 9.1% annually—the fastest rise in 40 years and firmly ahead of expectations.

With inflation still running red-hot, investors are concerned that the Federal Reserve will be unable to avoid causing a recession as it battles higher prices by raising interest rates, denting economic demand.

Speakers from the Fed have done little to calm market concerns. Atlanta Fed President Raphael Bostic said on Wednesday that “everything is in play” for the Fed’s July meeting, while Cleveland Fed President Loretta Mester said the CPI report was “uniformly bad” and didn’t rule out a gigantic rate hike this month.

“That’s led to serious speculation among investors that the Fed could hike by 100 basis points at their next meeting, which would be even faster than the 75 basis points we saw in June that itself was the biggest hike since 1994,” said Henry Allen, an analyst at Deutsche Bank.

The typical rate increase is 25 basis points, or one-quarter of 1%.

But investor attention Thursday will be forced to shift from inflation and recession worries to corporate earnings, which should give markets more insight into how companies are faring in this environment and what their outlook is.

Kicking off earnings season are some of Wall Street’s biggest players. JPMorgan Chase (ticker: JPM) and Morgan Stanley (MS) report results in the day ahead, with Citigroup (C) and BlackRock (BLK) following on Friday.

“With bond markets increasingly pricing economic slowdown equity markets are struggling to make sense of what comes next when it comes to valuations, with the first test coming later today,” said Michael Hewson, an analyst at broker CMC Markets .

“My sense is that this will be a quarter that triggers analysts to downgrade their forward earnings estimates,” said Neil Wilson, an analyst at broker Markets.com.

Write to Jack Denton at jack.denton@dowjones.com