U.S. Stock Futures Wobble as Earnings Season Begins

By Anna Hirtenstein 

U.S. stock futures wavered Tuesday ahead of the start of earnings season with several large U.S. banks reporting this morning.

Futures tied to the S&P 500 edged down 0.2%, suggesting stocks could come under pressure after the opening bell. A rally in megacap tech stocks led the broad market index on Monday to its second-highest close in history. Futures linked to the Nasdaq-100 ticked up 0.8%

Uncertainty about a second wave of infections and the extent to which governments may have to renew restrictions to control the spread is weighing on investors' minds as the third-quarter earnings season kicks off on Tuesday.

"Earnings season will create a lot of volatility, especially ahead of the election," said Ludovic Subran, chief economist at Allianz. "The market focus will remain on financial and tech earnings: this will be a main driver."

A slew of financial companies including BlackRock, JPMorgan Chase and Citigroup will report results before the market opens, starting at about 6 a.m. ET. Their earnings will be closely scrutinized for fresh projections on loan defaults and indications on the health of the financial system.

"We will start to see that banks are in a very difficult position because of the low or negative interest rates in the U.S. and Europe," Mr. Subran said. "The risk is more of a downside correction to financials."

Johnson & Johnson and Delta Air Lines are also scheduled to report earnings on Tuesday morning. J&J's shares slid 1.5% ahead of the New York opening bell after it halted its coronavirus vaccine trials due to a participant becoming unexpectedly sick, prompting fresh speculation about when immunization shots may become widely available.

J&J's vaccine is one of the most advanced Covid-19 shots in development, and is among just a handful that had entered the last stage of testing in the U.S. This is the second time such a trial has been put on hold over a safety concern: AstraZeneca has since resumed its testing efforts in the U.K., but its clinical trials in the U.S. remain suspended.

"It's a reminder that while we have this race to get a vaccine, it could actually take longer," said Paul Jackson, global head of asset-allocation research at Invesco. People are also being too optimistic over how quickly a vaccine can halt the pandemic, he cautioned. "If we get one through the trials and authorized, that would be a great step, but then it will still take quite some time to get it widely distributed."

In bond markets, the yield on benchmark 10-year Treasury notes edged down to 0.756%, from 0.775% on Friday.

Traders are also awaiting the latest inflation data, due out at 8:30 a.m. Consumer prices are expected to have risen in September for a fourth consecutive month. But inflation pressure is still likely to be muted, keeping the door open for the Federal Reserve to continue with its easy-money policy.

In trading ahead of the opening bell, Walt Disney rose 4.3% after it announced a major reorganization of its business to focus more on streaming. Apple's shares added 2% ahead of a company presentation scheduled for Tuesday where it is expected to unveil the next iPhone.

Overseas, the pan-continental Stoxx Europe 600 fell 0.2%.

In Asia, most major benchmarks were mixed by the close of trading. The Shanghai Composite Index was flat after trade data showed that Chinese exports rose nearly 10% in September, reflecting a continuing recovery. Markets in Hong Kong were closed due to Tropical Storm Nangka being slated to hit the city.

The International Monetary Fund is also set to put out an updated outlook for global economic growth at 8:30 a.m., as finance ministers and central bankers gather virtually for the IMF and World Bank's annual meetings.

Write to Anna Hirtenstein at [e-mail]

(END) Dow Jones Newswires

October 13, 2020 06:36 ET (10:36 GMT)

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