U.S. stock futures fell at the start of trading Friday morning as markets cap off a bumpy week following the Federal Reserve’s interest rate decision on Wednesday and further pressure in the banking sector.
The S&P 500 (^GSPC) dropped about 0.4% at the open, while the Dow Jones Industrial Average (^DJI) lost 160 points, or 0.5%. The technology-heavy Nasdaq Composite (^IXIC) also declined, falling roughly 0.3%.
WTI crude oil (CL=F) fell about 3% in early trading to $68 a barrel, nearing its lowest level in nearly two years. Brent crude (BZ=F) also dipped 2.6% to just under $74 a barrel.
The pressure in oil comes after Energy Secretary Jennifer Granholm told lawmakers on Thursday refilling the country’s Strategic Petroleum Reserve (SPR) may take several years and that it will be “difficult” to utilize the current decline in oil prices.
U.S. government bond yields also dipped. The benchmark 10-year Treasury yield fell 10 basis points to trade near 3.3%.
On Wednesday, the Fed raised rates by a 25 basis points, bringing the range for the fed funds rate to 4.75%-5%, the highest since October 2007, in addition to suggesting its aggressive rate hiking campaign to quell inflation was winding down.
“The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time,” the Fed said in its policy statement, doing away with language for “ongoing rate increases” in interest rates.
Stocks ended Thursday’s volatile trading session higher as investors digested the Fed’s latest move.
“Powell stuck with the Fed’s narrative that there is still a path toward a soft-landing or returning inflation to target without pushing the economy into a recession,” wrote Ryan Sweet, Chief U.S. economist at Oxford Economics, in a note on Wednesday. “However, that path has become narrower because of the pressure on the banking system.”
Bank sentiment dipped early Friday as investor concerns surrounding financial stability remain heightened following the stunning collapse of Silicon Valley Bank, which trigged a ripple effect across the entire financial system.
Regional bank stocks including First Republic Bank (FRC), PacWest Bancorp (PACW), Western Alliance Bancorporation (WAL), and Regions Financial (RF) all traded to the downside to kick off the trading day.
Big bank stocks also slipped with Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and Goldman Sachs (GS) all falling lower at market open.
Shares of European bank operators Deutsche Bank (DB) and UBS (UBS) sank more than 7% and 4%, respectively, as Euro banks continue to feel the aftermath of Credit Suisse’s downfall.
According to Reuters, Deutsche Bank’s credit default swaps, a form of insurance against default, jumped to a four-year high, adding to greater stability concerns overseas.
Block (SQ) fell another 2% in early trading on Friday, after falling 15% on Thursday, as Wall Street continued to sift through a new piece of short-seller research out of Hindenburg.
Hindenburg Research levied accusations of fraud against the company, which was founded and led by billionaire Jack Dorsey. In response, Block said it intended to work with the SEC to “explore legal action against Hindenburg Research for the factually inaccurate and misleading report they shared about our Cash App business today.”
“We had hoped Block’s response/refutation would be more detailed and believe ‘exploring legal action’ will likely not be enough to settle investors’ concerns,” Citi analyst Peter Christiansen wrote in reaction to the Hindenburg report, echoing shareholder sentiment.
Coinbase (COIN) dropped another 1.5% after slumping 14% on Thursday following the company’s disclosure it received a Wells Notice from the SEC, which warns companies of pending action from the regulator.
Netflix (NFLX), which led the S&P 500 on Thursday with the stock surging more than 9%, saw shares settle in early trading on Friday, up about 2%.
Activision Blizzard (ATVI) climbed 6.7% at the open, the most since January 2022, after European Union regulators said on Friday it was narrowing the scope of its probe into Microsoft’s planned $75 billion takeover of the video game developer.
Alexandra is a Senior Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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