Stock Futures Inch Higher Ahead of Busy Earnings Week

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U.S. stock futures edged up slightly early Monday, starting the week on a quiet note before a flood of corporate earnings reports and economic data.

S&P 500 futures rose 0.18% and Dow Jones Industrial Average futures added 0.07%. Nasdaq 100 futures climbed 0.25% as tech stocks aimed to rebound from Friday’s selloff.

Stocks are coming off a choppy week where the S&P 500 and Dow posted modest gains while the Nasdaq slumped. Investors grew cautious amid spiking oil prices, rising bond yields, sticky inflation and escalating conflict between Israel and Hamas.

But Wall Street remains relatively buoyant near all-time highs, betting on a strong economic recovery and blockbuster earnings season. With valuations stretched, companies must impress with profit and guidance.

This week brings results from 11% of S&P 500 companies, including Netflix, Johnson & Johnson, Tesla, Bank of America and Chipotle. The breadth of industries reporting will provide key clues on the health of the consumer and corporate America.

Charles Schwab and Zions Bancorp report earnings Monday before the open, along with economic data on New York state manufacturing activity.

Over the weekend, Israel pounded Gaza with airstrikes, prompting Arab states to call for an emergency U.N. Security Council meeting. The U.S. approved a $735 million arms sale to Israel. Energy markets monitored the conflict for any supply disruptions.

On Friday, the S&P 500 and Dow closed out their second straight week of gains, rising 0.5% and 0.8% respectively. The Nasdaq lost 0.2% for the week, while the small-cap Russell 2000 jumped 2.1%.

For the year, the S&P is up 12.7%, the Dow has gained 1.6%, the Nasdaq has surged 28.1% and the Russell 2000 has advanced 22.4% amid massive stimulus and the vaccine rollout.

But many investors expect more turbulence ahead as the pandemic recovery moves from “panic to precision,” requiring more nuance from the Federal Reserve, fiscal policymakers and corporate executives navigating supply chain bottlenecks and labor shortages.

“With equity valuations this high, investors should brace themselves for a level of volatility in stock prices that we have not experienced in some time,” said Bill Northey, senior investment director at U.S. Bank Wealth Management.

As the economy reopens fully and pandemic-era fiscal and monetary aid fade, markets may see more volatility and require greater precision from policymakers and executives. But many analysts remain bullish on stocks amid strengthening consumer and business fundamentals.

JPMorgan’s trading desk advised buying any big downdrafts, arguing they would be short-lived dips in a long bull run. Goldman Sachs reiterated its overweight stock allocation and forecast of 4,300 on the S&P 500.

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