Finance Broadcast

Stock Futures Flat With A Big Earnings Week Ahead

Major U.S. stock indexes linked futures contracts ruled flat early Monday as investors looked ahead to one of the busiest weeks of the Q1 earnings season, CNBC reported.

Stock Futures Flat With A Big Earnings Week Ahead

Contracts tied to the S&P 500 and the Dow moved close to the flatline, while futures related to Nasdaq 100 traded marginally lower.

Tesla shares traded slightly lower premarket ahead of the earnings report of the electric carmaker, following the bell Monday.

Stock Futures Flat With A Big Earnings Week Ahead

A busy week stretched ahead for investors with the American Families Plan of President Joe Biden set to debut, a Federal Reserve meeting scheduled, and a torrent of corporate earnings reports and more inflation data to be released.

Investors would be updated by about a third of the S&P 500 this week as to how their businesses performed over the three months ended March 31. Some of the world’s largest tech companies were scheduled to report results this week, including Amazon, Apple, Microsoft, and Alphabet.

With the gradual reopening of the global economy, firms like Caterpillar,  Boeing and Ford were expected to note cost pressures they faced with increasing transportation and materials prices.

Corporations had mostly managed to perform better than Wall Street’s projections into the earnings season so far. With 25% of the S&P 500 companies reporting results of the first-quarter, 84% had posted a positive per-share earnings while 77% had overtaken revenue estimates.

According to commentators, if 84% was the final percentage, it would level up with the highest percentage of S&P 500 companies posting a positive EPS surprise since 2008, when FactSet started tracking the metric.

However, strong Q1 results had been met with a reception that was largely lukewarm, by investors. According to strategists, traders’ enthusiasm had already been kept in check by near- record high S&P 500 levels and already high valuations. However, indexes were within 1% of the all-time highs hit by them.   

Equity markets had last week, come under pressure, following reports in several outlets that Biden would look to hike the capital gains tax on wealthy Americans to help fund the second phase of his Build Back Better agenda. The president was expected to offer a detailed picture of his $1.8 trillion plan, including proposed spends aimed at family support and worker education to a joint Congress session Wednesday evening.

The proposal would see the capital gains rate increased to 39.6% from 20% for those earning $1 million and more, according to Bloomberg News.

News of the possible capital gains tax hike on wealthy Americans pushed down the S&P 500 almost 1%,  Thursday, when several outlets started reporting the proposed increase.

The equity index however, managed to more than make up the losses rebounding 1.1% on Friday, it however, closed the week down 0.13% snapping a winning streak of four-weeks. The Nasdaq and the Dow retreated 0.3% and 0.5% last week, respectively.

According to Evercore ISI strategist Dennis DeBusschere who spoke to CNBC on Sunday, fears of peaking economic growth and negative global Covid-19 news might have ended the weekly win streak of the S&P 500, but the negative sentiment would not last much longer.

A labor market that was rapidly improving would continue with the US normalizing, he wrote. He added it was inconsistent with fears of peak GDP and suggested the output gap would close quickly, putting upward pressure on Cyclical asset prices, inflation, and bond yields.

He recommended investors snap up U.S. economic health sensitive stocks known as cyclicals and preempt a market tone pivot. 

Meanwhile, the Fed which was set to meet Tuesday and Wednesday was expected to defend its policy of allowing inflation to run hot, while assuring markets it saw the increase in prices as only temporary. 

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