Five things you need to know before the market opens on Tuesday, July 18:
1. -- Stock Futures Mixed As Earnings Season Ramps Up
U.S. equity futures traded flat Tuesday, while the dollar held near fifteen month lows on foreign exchange markets and Treasury yields steadied, as investors braced for the ramp-up of the second quarter earnings season and a key reading of consumer spending heading into the summer months.
Stocks have added gains over five of the past six sessions, in fact, following softer-than-expected inflation data last week and a solid start to the second quarter reporting season, which unofficially began Friday with updates from JPMorgan, Citigroup and Wells Fargo.
Analysts expect collective second quarter earnings for the S&P 500 to fall 8.1% from last year to $428.9 billion, with a modest 1% advanced pegged for the three months ending in September.
Of the 30 S&P 500 constituents reporting so far, 80% have topped Street forecasts, well ahead of the long-term average of 66.4% and the four quarter average of 73.4%, according to data from Refinitiv.
The S&P 500, which is up 17.8% for the year and sits just 245 points, or 5.1%, from the all-time high it reached in January of last year, is also finding a solid tailwind from falling Treasury bond yields as traders pare bets on Fed rate hikes over the coming months.
The CME Group's FedWatch suggests a 97.3% chance the Fed will lift rates by a quarter of a point next week in Washington, but put the odds of a follow-on move in September and November at just 11% and 24% respectively.
Benchmark 2-year Treasury note yields, which touched a 2007 high of 5.095% earlier this month, were last seen trading at 4.696% while 10-year notes were holding at 3.764%.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 were indicating a modest 2 point opening bell dip while those linked to the Dow Jones Industrial Average were priced for a 26 point move to the u[side. Nasdaq futures were down 11 points.
The Europe-wide Stoxx 600 was marked 0.25% higher in early Frankfurt trading while Britain's FTSE 100 gained 0.25% in London.
Overnight in Asia, the region-wide MSCI ex-Japan index slipped 0.72% into the close of trading, while the Nikkei 225 resumed trading from its Marine Day holiday on Monday to book a modest 0.32% advance.
2. -- Retail Sales On Deck As Job Market Likely Supports Spending
The Commerce Department will publish its regular monthly reading of retail sales activity Tuesday, with analysts looking for a modest rebound in spending from May thanks to modestly higher gasoline sales and a resilient job market.
Economists expect a headline gain of around 0.5%, following on from a 0.3% gain in May, with the so-called control group reading, which strips out energy, auto and other seasonally volatile items, forecast to grow by around 0.2%.
The June jobs report, while the weakest in three years, still noted an additional 209,000 hires over the month, according to Labor Department figures, with wages rising 4.4%, up from the 4.3% pace recorded in May.
"We currently estimate that real consumption spending rose at a 1% annualized rate in the second quarter, down sharply from the 4.2% surge in Q1," said Ian Shepherdson of Pantheon Macroeconomics. "More broadly, though, consumers’ spending is suffering from the depletion of excess savings built up during Covid."
3. -- Bank of America Earnings On Deck As U.S. Lenders Outpace Forecasts
Bank of America (BAC) -) shares edged higher in pre-market trading ahead of the lender's second quarter earnings prior to the opening bell.
Following on from a series of better-than-expected results from rivals JPMorgan (JPM) -), Citigroup (C) -) and Wells Fargo (WFC) -) last week, as well as solid results from recent Federal Reserve stress tests, Bank of America is expected to see its bottom line rise 7.7% from last year to 84 cents per share on revenues of $25.13 billion.
Analysts will likely track Back of America's net interest income levels, which are likely to rise 14% from last year to $14.2 billion, as well as it outlook for loan growth and dealmaking in a resilient U.S. economy. Its comments on the state of commercial real estate, a concern flagged in Wells Fargo's Friday update, will also be in focus.
Bank of America shares were marked 0.37% higher in pre-market trading to indicate an opening bell price of $29.51 each.
4. -- Lockheed Martin Earnings In Focus Following F-35 Payments Report
Lockheed Martin (LMT) -) shares edged higher in pre-market trading ahead of the aerospace and defense contractor's second quarter earnings before the opening bell.
Lockheed is expected to post an adjusted bottom line of $6.45 per share, up 2% from last year, on revenues of $15.91 billion.
Management commentary on the delivery of F-35 fighter jets to the U.S. Defense Department will also be in focus following a Monday report from Bloomberg that suggested the Pentagon could hold back more than $400 million in payments from an existing contract until it fixes a long-running software glitch.
The dispute could affect Lockheed's bid for the U.S. Air Force's $2.3 billion Next Generation Air Dominance program, which begins next year and aims to replace the current F-22 Raptor fighter jet,
Lockheed Martin shares were marked 0.41% higher in pre-market trading to indicate an opening bell price of $471.92 each.
5. -- AT&T Shares Rise From 30-Year Low Amid Lead Cable Risks
AT&T (T) -) shares moved higher in pre-market trading after closing at a three-decade low last night amid liability risks linked to its legacy network of lead-covered cables.
The massive collective of cables may have contaminated large areas of both land and water in the United States, according to a recent report from the Wall Street Journal, which first raised the allegations.
Citigroup analysts said yesterday that AT&T faces a "long-term overhang" of risks linked to the cables, while JPMorgan said the group likely has the "largest exposure given its massive LEC business as well as owning the original AT&T long haul network."
AT&T will publish its second quarter earnings before the market opens on July 26, with early estimates suggesting an adjusted bottom line of 60 cents per share on revenues of $30 billion.
AT&T shares were marked 0.9% higher in pre-market trading to indicate an opening bell price of $13.65 each. The stock hit a 30-year low of $13.48 during the Monday session.
