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S&P 500 futures slip as traders brace for the beginning of earnings season

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Traders on the ground of the NYSE, June 24, 2022.

Source: NYSE

U.S. equities futures dipped early Monday morning as Wall Street looked ahead to big company earnings reports.

Futures tied to the Dow Jones Industrial Average slipped by 148 points, or 0.47%. S&P 500 futures fell 0.58%, and Nasdaq 100 futures lost 0.75%.

Twitter shares fell greater than 5% within the premarket after Elon Musk terminated a deal price $44 billion to purchase the social media company. The billionaire took issue with the variety of bots and faux accounts on the platform and said Twitter wasn’t being truthful about how authentic activity on the platform was. Nonetheless, the corporate said it gave Musk the data he needed to evaluate the claims.

Monday’s moves lower come on the back of worsening Covid trends in China, with Shanghai detecting its first case of the BA.5 subvariant and Macau closing its casinos for per week.

“COVID headwinds aren’t only a Chinese phenomenon – cases are climbing globally, although the chance of lockdowns within the US and EU stays extremely low,” wrote Adam Crisafulli of Vital Knowledge.

Wall Street is coming off a mixed session through which the Dow and S&P 500 fell barely, while the Nasdaq Composite rose for a fifth straight day. All of the foremost averages secured a winning week after a stronger-than-expected jobs report Friday showed that the economic downturn worrying investors has not yet arrived and added to positive sentiment.

Still, the 2-year Treasury yield jumped its 10-year counterpart, an inversion many see as a recession indicator. The two-year rate on Monday traded at 3.08%, roughly 2 basis points above the 10-year.

“While the markets resulted in solid green for the week, investors should brace for continued volatility in July, with ongoing uncertainties looming with respect to inflation, Fed policy, recession concerns, the enduring Russia-Ukraine war, all as we also move into corporate earnings season,” said Greg Bassuk, chief executive officer at AXS Investments.

The roles report, while good for the economy, could embolden the Federal Reserve to proceed its aggressive rate hikes in the approaching months to fight persistently high inflation. It’s going to be tested this week with a slew of earnings from major banks and consumer inflation data this week on deck.

“With recessionary fears weighing on the markets, investors are hyper-focused on corporate earnings for greater clues in regards to the health of corporate America and the broader U.S. economy,” Bassuk said.

“A sharper lens will likely be needed to dissect these earnings reports, as a powerful second quarter may be accompanied by very conservative outlooks,” he added. “As commodity and other producer costs remain high, corporations will likely be factoring within the extent to which those heightened prices may be passed on to consumers and, likewise, methods to keep earnings vigorous amid economic, geopolitical and other key headwinds.

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PepsiCo and Delta Air Lines are scheduled to report earnings Tuesday and Wednesday. JPMorgan Chase, Morgan Stanley, Wells Fargo and Citigroup are set to report at the top of the week.

Investors are also waiting for key inflation data this week. The June consumer price index will likely be released Wednesday and is predicted to point out headline inflation, including food and energy, rising above May’s 8.6% level.

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