Traders on the floor of the NYSE, June 24, 2022.
Source: NYSE
U.S. stock futures were lower on Sunday evening as Wall Street awaited major company earnings reports and key inflation data after a strong jobs report.
Futures tied to the Dow Jones Industrial Average fell 51 points, or 0.1%. S&P 500 futures fell 0.2% and Nasdaq 100 futures lost 0.4%.
The Dow and S&P finished slightly lower on Friday, while the Nasdaq Composite rose for a fifth straight day. All major averages clinched a winning week after a stronger-than-expected jobs report on Friday showed the economic downturn that worries investors has not yet set in and added to positive sentiment.
Treasury yields jumped, with the 2-year Treasury yield holding above the 10-year yield, an inversion that many see as an indicator of a recession.
“Although markets ended the week solidly in the green, investors should prepare for continued volatility in July, with continued uncertainty looming around inflation, Fed policy, recession concerns, the ongoing Russia-Ukraine war, all of which as we move into corporate earnings season as well,” said Greg Bassuk, CEO of AXS Investments.
The jobs report, while good for the economy, could encourage the Federal Reserve to continue its aggressive rate hikes in the coming months to combat persistently high inflation. It will be tested this week with a slew of major bank earnings and consumer inflation data this week.
“With recessionary fears weighing on the markets, investors are hyper-focused on corporate earnings for better clues about the health of corporate America and the broader US economy,” Bassuk said.
“A sharper lens will be needed to analyze these earnings reports, as a strong second quarter may be accompanied by a very conservative outlook,” he added. “As raw material and other producer costs remain high, companies will consider the extent to which these increased prices can be passed on to consumers, and likewise how to keep earnings strong amid economic, geopolitical and other key headwinds.”
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PepsiCo and Delta Air Lines are due to report earnings on Tuesday and Wednesday. JPMorgan Chase, Morgan Stanley, Wells Fargo and Citigroup are set to report at the end of the week.
Investors are also awaiting key inflation data this week. The consumer price index for June will be released on Wednesday and is expected to show headline inflation, including food and energy, rising above May’s 8.6% level.
“Investors expect more aggressive action by the Fed to raise interest rates unless inflation data shows excessive price reductions, balanced against concerns that overly aggressive rate hikes could tip the U.S. into recession territory,” Bassuk said .
The June producer price index is due Thursday, and the University of Michigan consumer sentiment report for July is due Friday.
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