U.S. stock futures hold near five-week highs as investors await earnings wave and Fed decision

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U.S. stock futures were a touch softer on Monday as traders held their fire ahead of a week stuffed with monster earnings and Fed action.

How are stock-index futures trading
  • S&P 500 futures ES00, +0.30% dipped 3 points, or 0.1%, to 3962
  • Dow Jones Industrial Average futures YM00, +0.28% fell 22 points, or 0.1%, to 31853
  • Nasdaq 100 futures NQ00, +0.35% gained 4 points, or less than 0.1%, to 12427

On Friday, the Dow Jones Industrial Average DJIA, -0.43% fell 138 points, or 0.43%, to 31899, the S&P 500 SPX, -0.93% declined 37 points, or 0.93%, to 3962, and the Nasdaq Composite COMP, -1.87% fell 226 points, or 1.87%, to 11834.

The Russell 2000 index RUT, -1.62% of small cap stocks is up 5.8% so far in July.

What’s driving markets

Traders were keeping their powder dry early on Monday, apparently reluctant to build bold positions before a big batch of corporate earnings that could shape market sentiment in the short term.

For the new week there will be 175 S&P 500 companies reporting, including big beasts like Apple AAPL, -0.81%, Alphabet GOOGL, -5.63%, Microsoft MSFT, -1.69% and Amazon AMZN, -1.77%, though the action doesn’t pick up again until Tuesday.

The S&P 500 is down 16.9% for the year to date but has climbed 8% from its 52-week low hit in mid-June, with sentiment underpinned of late by a corporate reporting season that has proved better than some had feared.

“Earnings season has been mixed, but boring is beautiful,” said Stephen Innes, managing partner at SPI Asset Management.

With 21% of S&P 500 companies having reported, the second quarter blended earnings growth rate for the benchmark index is 4.8%, according to John Butters, senior earnings analysts at FactSet.

“If 4.8% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q4 2020 (4.0%),” said Butters. However, “68% of S&P 500 companies have reported a positive EPS surprise and 65% of S&P 500 companies have reported a positive revenue surprise,” he added.

The market’s forward 12-month P/E ratio is 16.7, below the 10-year average of 17.0, according to FactSet, a pullback that is supporting valuations.

The looming Federal Reserve rate decision on Wednesday provided another reason for caution. The central bank is expected to raise borrowing costs by 75 basis points to a range of 2.25% to 2.50%, but investors will be keen to hear about how the Fed sees the pace of future hikes.

Ahead of the Fed, the 10-year Treasury yield TMUBMUSD10Y, 2.812% is up 3 basis points to 2.783% and ICE Dollar index DXY, -0.41% is barely changed at 106.70.

It’s a thin start to the week for economic data. The Chicago Fed national activity index for June will be released at 8.30 a.m. Eastern.

How are other assets faring
  • U.S. crude futures CL.1, +0.75% fell 1.6% to $93.22 a barrel, at one point touching a five-month low around $91, as traders worried about slowing demand as economies sputter.
  • Bitcoin BTCUSD, -3.24% fell 3.6% to $21,928 and gold GC00, +0.11% shed 0.2% to $1,724 an ounce.
  • Asian and European markets were softer after taking the lead from Wall Street’s Friday pullback. Hong Kong’s Hang Seng HSI, -0.22% fell 0.3%, the Shanghai Composite SHCOMP, -0.60% lost 0.6% and Japan’s Nikkei 225 NIK, -0.77% slipped 0.8%. In Europe, the Stoxx 600 SXXP, -0.02% shed 0.2%.
  • Wheat futures W00, +3.52% are up 3.4% to $7.85 a bushel after Russia agreed a deal with Ukraine to export grain and then targeted the port of Odessa with missiles.