US Stocks Brace for a Tepid Start as Earnings Season Heats Up
US stock markets are poised for a subdued opening on Tuesday, with futures pointing towards a slight decline. This follows a mixed performance last week, where the S&P 500 and Dow Jones ended their six-week winning streak while the Nasdaq Composite notched its seventh consecutive week of gains.
The upcoming days will see a surge in earnings reports, with five of the seven so-called “Magnificent 7” companies set to unveil their financial results. This prestigious group includes tech giants like Apple, Microsoft, Alphabet, Meta, and Amazon, whose performance will be closely scrutinized by investors.
Pre-Market Indicators
In pre-market trading on Monday, the SPDR S&P 500 ETF Trust (SPY) dipped by 0.07% to $580.44, while the Invesco QQQ ETF (QQQ), which tracks the Nasdaq 100, edged up by 0.03% to $495.54. These early indicators suggest a cautious sentiment among investors ahead of the earnings season and the upcoming elections.
Cues from Last Session
Monday saw the Dow Jones Industrial Average end its five-day losing streak, closing the day with a 0.65% gain. The Nasdaq Composite continued its upward momentum, fueled by anticipation for the earnings reports from the “Magnificent 7.” Crude oil prices showed signs of recovery after a sharp decline over the weekend, likely driven by simmering tensions in the Middle East and Israel’s missile strikes in Iran.
However, treasury yields continued their upward trajectory, reflecting concerns over the long-term trajectory of US national debt. This sentiment was further amplified by warnings from the International Monetary Fund regarding the potential for fiscal discipline to be a challenge for the next administration, regardless of who wins the elections.
Economic Data and Analyst Insights
On the economic data front, the Federal Reserve Bank of Dallas’s general business activity index for manufacturing in Texas rose to -3 in October, signaling a slight improvement from the -9 reading in September.
Sam Stovall, chief investment strategist at CFRA Research, expressed optimism about the overall earnings season, suggesting it could surpass expectations. He pointed to a historical trend where actual results have exceeded end-of-quarter estimates for the past 62 quarters.
Jeremy Siegel, an economist at WisdomTree and the Wharton School, attributed the ongoing bull market to the robust performance of the tech sector, particularly Tesla, which has been leading the charge. He highlighted Tesla’s strong positioning in electric vehicles and autonomous driving technology as key drivers of its success.
However, Siegel also cautioned that a Republican sweep in the upcoming elections, where the GOP gains control of both the Senate and House, could temporarily fuel concerns about higher deficits, potentially causing bond yields to rise significantly.
Upcoming Economic Data
Tuesday’s economic calendar is relatively light, but includes releases such as:
* Retail (ex-auto) and wholesale inventories data at 8:30 a.m. ET
* S&P Case-Shiller home price index at 9 a.m. ET
* Consumer confidence index at 10 a.m. ET
* Job openings data at 10 a.m. ET
Stocks in Focus
Several stocks will be in the spotlight on Tuesday due to earnings reports, pre-market trading activity, or other news:
*
Ford Motor Co.
(F) shares fell by nearly 5.5% in pre-market trading after the automaker cut revenue and profit guidance.*
McDonald’s Corp.
(MCD) shares declined by nearly 2% in pre-market trading following a report of a higher-than-expected decline in global sales.*
Trump Media & Technology Group Corp.
(DJT) shares surged by nearly 13% after former President Trump’s rally at Manhattan’s Madison Square Garden over the weekend.*
Boeing Co.
(BA) priced its offering at $143 per share, with 112.5 million shares up for purchase.*
Coinbase Global Inc.
(COIN) shares climbed by 3.4% after Bitcoin crossed the $71,000 mark.* Investors will also be focusing on earnings reports from
Alphabet Inc., Advanced Micro Devices Inc., Visa Inc., and Pfizer Inc.
Commodities, Bonds, and Global Markets
Crude oil futures edged up in early New York trading, rising by 1% after plummeting over 6% during the weekend. The 10-year Treasury note yield surged to 4.292%. Major Asian markets ended the day mixed on Tuesday, while European stocks showed strength in early trading.
Outlook
The upcoming week promises to be a busy one for investors, with a confluence of earnings reports, economic data releases, and the looming presidential election. Market participants will be closely watching for clues about the direction of interest rates, the impact of earnings season on corporate performance, and the potential for a post-election relief rally.
While the current sentiment is cautious, the performance of the “Magnificent 7” and other key companies will play a pivotal role in shaping the trajectory of the stock market in the coming days and weeks.
