Dow futures fall 280 pts; global banking concerns grow

By Peter Nurse    

Investing.com -- U.S. stocks are seen opening lower Friday, with sentiment hit by continued concerns over the health of the global banking system ahead of the release of manufacturing and services activity data. 

At 07:00 ET (11:00 GMT), the Dow Futures contract was down 280 points, or 0.9%, S&P 500 Futures traded 30 points, or 0.8%, lower and Nasdaq 100 Futures dropped 47 points, or 0.4%.

The main averages closed with small gains Thursday, but lost steam in the afternoon, with the blue chip Dow Jones Industrial Average erasing an earlier 400-point rally to close just 75 points higher.

U.S. Treasury Secretary Janet Yellen tried to boost confidence on Thursday, reiterating that she was prepared to take further action to ensure that Americans' bank deposits stay safe.

However, strains are apparent as borrowing at the Federal Reserve’s discount window was a hefty $110.2 billion as of Wednesday. Additionally, lending from the Fed's new Bank Term Funding Program ballooned to $53.7B, while loans to foreign central banks surged to $60B.

And in Europe, Deutsche Bank (ETR:DBKGn) stock shed more than 10%, leading a wider decrease in the region’s banking stocks, after a record surge in the cost of insuring against the risk of a default late in the previous day. 

This banking turbulence has lifted expectations that the Fed will pause its interest rate-hiking cycle next month. That said, the U.S. central bank has other things to consider, including the still-tight labor market and next week’s highly significant inflation release.

Before that investors will get the March PMI readings on manufacturing and services, at 09:45 ET (13:45 GMT).

The equivalent data earlier in the session showed that the Eurozone economy picked up further in March as a strong service sector compensated for ongoing weakness in manufacturing.

In corporate news, the banking sector will remain in the spotlight, while payments firm Block (NYSE:SQ) slumped premarket after Hindenburg Research disclosed short positions in the payments firm, alleging in a report that the company overstated its user numbers and understated its customer acquisition costs.

Block called the report "factually inaccurate and misleading".

Oil prices fell Friday, ending a largely positive week on the retreat after U.S. officials expressed caution over the length of time it would take to refill the country’s Strategic Petroleum Reserve, which has fallen to a near 50-year low.

U.S. Energy Secretary Jennifer Granholm said on Thursday that it will be “difficult” to refill government oil reserves this year, undermining previous indications that the Biden administration will begin restocking if prices traded around $67 to $72 a barrel.

By 07:00 ET, U.S. crude futures traded 3.3% lower at $67.65 a barrel, while the Brent contract fell 3.1% to $73.56. 

Both crude benchmarks are still on track for a small weekly gain, recovering from their biggest weekly declines in months last week as the banking sector exacerbated worries about a possible recession.

Additionally, gold futures rose 0.1% to $1,996.60/oz, while EUR/USD traded 0.9% lower to 1.0732.