Futures Gain As Investors Cheer Resilient Earnings
U.S. stock index futures climbed on Tuesday as Bank of America and Johnson & Johnson reported upbeat earnings, while signs of uneven economic recovery in China and prospects of more Federal Reserve interest rate hikes capped gains.
Shares of Bank of America Corp advanced 2% in premarket trading after its first-quarter profit rose on higher earnings from customers' interest payments as the Federal Reserve raised borrowing costs.
Johnson & Johnson climbed 1.7% after the healthcare conglomerate raised its 2023 profit forecast, expecting its newer cancer treatments and multiple myeloma drug Darzalex to cushion declining sales for some older drugs.
Bank Of New York Mellon Corp gained 0.8% after its first-quarter profit beat estimates.
Goldman Sachs Group Inc, however, dropped 1.8% after its first-quarter profit fell as the worst three months for dealmaking in more than a decade eroded fees from investment banking while the lender's consumer unit continued to weigh on results.
Investor expectations were buoyed by strong results from big banks including JPMorgan Chase & Co last week in the backdrop of the recent banking turmoil sparked by the collapse of some mid-sized U.S. lenders.
Analysts have marginally brightened their outlook for first-quarter results. They expect quarterly profits at S&P 500 companies to decline 4.8% from the year-ago period, according to Refinitiv data on Friday, compared with a 5.2% decline forecast at the start of the earnings season.
"While we are less concerned about Q1 results given subdued expectations and the fact that hard data in Q1 is still generally holding up, focus of investors will rather be on forward guidance," said Mathieu Racheter, head of equity strategy research at Julius Baer.
"Current consensus estimates still point to a recovery in earnings growth and profit margins from Q3 onwards. We maintain our defensive tilt but continue to see an opportunity to load up on quality growth names at attractive valuations."
The CBOE Volatility index, also known as Wall Street's fear gauge, slipped to 16.78, its lowest since January 2022.
The main Wall Street indexes have traded in a tight range since earnings season kicked off but remain close to two-month highs on expectations that the Fed is nearing the end of its monetary tightening cycle.
Mixed economic data recently has supported bets the Fed will hike interest rates by 25 basis points in May and hit pause before cutting rates in the second half of the year.
Investors will keep an eye out for housing starts number for March, due at 8:30 a.m. ET, and remarks by Fed Board Governor Michelle Bowman, also a voting member of the rate-setting committee this year, for cues on policy outlook.
At 7:23 a.m. ET, Dow e-minis were up 129 points, or 0.38%, S&P 500 e-minis were up 16.75 points, or 0.4%, and Nasdaq 100 e-minis were up 80.25 points, or 0.61%.
Nvidia Corp gained 2.1% after HSBC upgraded the chipmaker's stock to "buy" from "reduce", surprised by its pricing power on artificial intelligence (AI) chips.
Alibaba Group Holding climbed 2.7% after Reuters reported Chinese regulators could fine Ant Group about a quarter less than the more than $1 billion initially planned and downgrade charges against the company.
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