Dow Jones, S&P 500, Nasdaq set for lower open as trade resumes in shortened earnings-season week

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9.35am: Big bank earnings in focus

US stocks slipped at the open on Tuesday as investors returning from the long weekend digested a sharp drop in China’s GDP and the latest corporate earnings.  

Just after the market opened, the Dow Jones Industrial Average had dipped 90 points or 0.3% at 34,212 points, the S&P 500 was down 3 points or 0.1% at 3,996 points, and the Nasdaq Composite was down 18 points or 0.2% at 11,062 points.

The big banks were once again in focus, with Goldman Sachs and Morgan Stanley delivering their latest quarterly results before the bell.

The Goldman Sachs Group Inc shares fell about 2.3% at the open after the financial services giant posted a bigger-than-expected profit decline of 69%, while Morgan Stanley added about 4.7% after posting a decline in profit that came in below expectations on higher net interest income and a strong quarter for its wealth management business.

“S&P500 earnings are expected to fall this earnings season, and revenue rise marginally as companies struggle in a challenging, inflationary environment,” commented market analyst Fiona Cincotta.

“A big focus will be on the outlook and the likelihood of a recession. At the World Economic Forum in Davos, a survey revealed that two-thirds of those questioned expect a global recession in 2023.”

Meanwhile, Tesla Inc shares gained 4.4% as data compiled by China Merchants Bank International showed its sales soared in China in January after the company slashed the price of its top-selling electric vehicle models earlier in the month.  

6.30am: Markets eye latest earnings reports

Wall Street is expected to open lower on Tuesday as traders return from the extended weekend break with the corporate earnings season in full swing and as they also look ahead to tomorrow’s producer inflation release after last week’s more benign consumer price index data. 

Futures for the Dow Jones Industrial Average fell 0.2% in pre-market trading, while those for the broader S&P 500 index fell 0.3%, and contracts for the Nasdaq-100 shed 0.4%.

“Last week’s inflation data may offer stocks something of a tailwind but given the extent of the collective provisions we have seen made by banks already against bad debts, there’s clear concern that a recession is coming,” commented James Hughes at Scope Markets. “Macroeconomic data today is limited but there is a speech by the president of the New York Fed later this evening. If this offers any clues over monetary policy then expect markets to react to this on Wednesday morning.”

Banks set the earnings ball rolling last Friday, with mixed fourth-quarter reports from JPMorgan, Bank of America, Wells Fargo, and Citigroup.

Today’s earnings highlights include more banks, with Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) numbers due before the bell, while United Airlines will come after the market close. 

“The banks may well dominate, but any guidance from the travel industry will again be welcome, specifically whether the current upbeat trajectory can be maintained,” Hughes added.

December’s producer price index (PPI) due Wednesday is expected to show a decline as lower gasoline prices help ease production costs. Consensus is for a moderation in the PPI to 6.8% from 7.4% in November.