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New York City — U.S. stock futures edged downwards on Tuesday morning as investors awaited the start of a packed earnings week on Wall Street. The Dow Jones Industrial Average futures dipped 46 points, or 0.13%, while the S&P 500 futures slipped 0.13%. The tech-heavy Nasdaq 100 futures also retreated 0.12% in early trading.

The dip comes after all three major averages closed higher during Monday’s session despite climbing Treasury yields, which typically pressure equities. The yield on the benchmark 10-year Treasury note rose 7 basis points to 4.7% but remains over 10 basis points below its recent peak, buoying market sentiment. Small caps were a particular bright spot, with the Russell 2000 index rallying 1.6% as investors rotated into more economically sensitive stocks.

“If the economy is going to re-accelerate, which it is doing, and if profits growth is going to re-accelerate, which it is doing, then small caps should lead the way. That’s what history says,” explained Richard Bernstein, CEO of Richard Bernstein Advisors. “And so I think there’s a little element of rationality, returning to the equity market, and this market is starting to broaden out a little bit.”

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All eyes are now on the impending flood of earnings reports, with 53 S&P 500 companies accounting for 11% of the index scheduled to post results this week. Five Dow components will also be reporting, including Johnson & Johnson, Goldman Sachs, and Lockheed Martin on Tuesday morning.

Financial giants kicked off the season on a strong note last week, buoying hopes that corporate profits will assuage some of the market’s inflation and geopolitical concerns. Charles Schwab impressed on Monday, while JPMorgan Chase surpassed expectations last Friday.

Investors are also awaiting key economic data due Tuesday, including September retail sales, industrial production, and housing market reports. The figures will provide critical insights into the health of the U.S. economy amid rising recession fears.

Geopolitical tensions remain elevated after Israel and Gaza exchanged rocket fire over the weekend. The conflict sparked worries that instability could spread to major oil producers like Iran, exacerbating supply constraints. But the wall of worry has so far been overshadowed by renewed bullishness, according to Sanders Morris Harris chairman George Ball.

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With upside surprises on both the macroeconomic and microeconomic front, the third quarter earnings season could give stocks the momentum needed to continue climbing the proverbial wall. But the rest of the week’s slate of big bank, healthcare, and industrial bellwether earnings will determine whether the rally has legs or if volatility is here to stay.

Key Takeaways:

Stocks futures edged down Tuesday morning ahead of major earnings reports.

Third quarter earnings season is kicking into high gear, with over 50 S&P 500 companies reporting this week.

Banks and financials have set a strong tone so far, lifting market sentiment after inflation and recession fears dragged down stocks in recent months.

Investors are watching for signals from corporate results and economic data that the Fed’s aggressive rate hikes are slowing growth as intended without triggering a downturn.

Geopolitical tensions remain a wildcard, but the market has so far proven resilient to various crises and uncertainties.

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The next few days will be critical as more Dow and S&P heavyweights report and offer forward guidance during a murky economic period.

To stay on top of the biggest market-moving earnings and data this week, be sure to tune into American Money. Our team of experts break down each report and analyze the key insights investors need to make informed decisions during this volatile time. Don’t miss exclusive coverage and insights — subscribe now for free access to our earnings analysis and all premium content.

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