The Goldman Sachs booth on the floor of the New York Stock Exchange
S&P 500 futures were flat Tuesday even after big banks and PepsiCo kicked off second-quarter earnings season with better-than-expected results.
With stocks at records and the Dow Jones Industrial Average just shy of 35,000, expectations were especially high going into the reports.
JPMorgan Chase unofficially kicked off second-quarter earnings season with earnings and revenue that topped Wall Street estimates. JPMorgan shares, which are up 24% this year through Monday’s close, were slightly lower in premarket trading.
Goldman Sachs shares ticked slightly higher in the premarket after beating the Street’s expectations for second-quarter fiscal results as well. A strong IPO market boosted Goldman’s investment banking revenues.
Even still, Dow Jones Industrial Average futures fell about 41 points, or 0.1%. S&P 500 futures traded near the flatline and Nasdaq 100 futures edged higher into mildly positive territory.
Boeing shares fell about 2% in premarket trading, pressuring sentiment on the Dow futures a bit, after the planemaker cut 787 Dreamliner production following the finding of a new flaw.
The market will also be watching a key inflation report due at 8:30 a.m. ET with the release of June’s Consumer Price Index. CPI is expected to increase 0.5% month-over-month and 5% from a year ago, according to economists polled by Dow Jones. The 10-year Treasury yield was flat ahead of the report.
JPMorgan Chase shares fell about 1% in premarket trading even after posting second-quarter earnings of $11.9 billion, or $3.78 per share, which exceeded the $3.21 estimate of analysts surveyed by Refinitiv.
The bank received a net benefit of $2.3 billion because of better-than-expected loan performance and the release of money it had set aside for credit losses. That benefit, along with a drop in Wall Street trading revenue, may be some reasons for the stock weakness. The shares also had a nice run into the report.
Meanwhile, Goldman Sachs shared edged about 0.7% higher in the premarket. The firm reported second-quarter earnings of $15.02 per share, topping analysts’ expectation of $10.24 earnings per share. The bank posted its second-best ever quarterly investment banking revenue as a rush of IPOs hit Wall Street last quarter.
PepsiCo on Tuesday reported a sizable beat for second-quarter earnings and revenue. The drink and snack giant also raised its forecast. Shares added 1.7% in premarket trading.
Overall earnings reports are expected to be stellar for the second quarter over the coming weeks with profit growth estimated at 64% year-over-year for the quarter, according to FactSet. That would be the biggest quarterly profit increase since 2009.
Banks’ earnings are expected to more than double for the second quarter, with an estimated 119.5% estimated year-over-year growth rate, according to analysts polled by FactSet.
In the regular trading session on Monday the Dow rose 126.02 points to close just below 35,000. The blue-chip measure is up 14% this year. The S&P 500 and Nasdaq Composite gained 0.3% and 0.2%, respectively, to record closes.
“High expectations for earnings and each companies’ forward guidance will push markets higher or disappointment may create a small pullback in equity markets,” said Jeff Kilburg, chief investment officer at Sanctuary Wealth. “Eyes will be on the major banks to set the tone for the next few weeks of earnings.”
Bank of America, Citigroup, Wells Fargo and Morgan Stanley all ended the day higher as well. They will report their earnings later in the week.
Federal Reserve Chairman Jerome Powell is scheduled to appear in front of Congress Wednesday and Thursday to provide an update on monetary policy. He has maintained that the Fed’s easy policies will remain intact until there’s more progress on its employment and inflation goals.