Stock futures pause after latest bounce as big batch of earnings reports loom

U.S. stock futures were barely changed Tuesday as the market eyes a rush of earnings reports in the next few days.

How are stock-index futures trading
  • S&P 500 futures
    ES00,
    -0.19%
    dipped 2 points, or less than 0.1%, to 4034

  • Dow Jones Industrial Average futures
    YM00,
    -0.18%
    fell 30 points, or 0.1%, to 33697

  • Nasdaq 100 futures
    NQ00,
    -0.30%
    eased 16 points, or 0.1%, to 11918

On Monday, the Dow Jones Industrial Average
DJIA,
+0.76%
rose 254 points, or 0.76%, to 33630, the S&P 500
SPX,
+1.19%
increased 47 points, or 1.19%, to 4020, and the Nasdaq Composite
COMP,
+2.01%
gained 224 points, or 2.01%, to 11364. The Nasdaq is up 8.6% for the year to date but remains down 29.2% from its record high hit in November 2021.

What’s driving markets

Stock futures were a tad softer as the market paused for breath ahead of a big batch of earnings following a strong couple of days.

The S&P 500 is up 3.1% over the last two sessions, taking its gain for the year so far to 4.7%, as investors show conviction the Federal Reserve is going to further slow its pace of interest rate rises amid easing inflation and weakening economic indicators.

The S&P 500 dropped about 20% last year, primarily the result of the Fed swiftly raising borrowing costs from effectively zero to a range of 4.25% to 4.50%. It hiked rates by 75 basis points in November, 50 basis points in December and traders are pricing in a near 100% certainty rates will go up by just 25 basis points next week.

The hope among investors is that a less hawkish Fed will help the U.S. economy avoid a hard landing and this will support company earnings, according to analysts.

“Hold onto your hats as this week’s ride could be on the wild side. And judging by the wave of New Year optimism that markets seemed to have been surfing pretty happily, investors are ready to believe in soft landings. The question at hand is what kind of cushioning do some of the world’s biggest companies have wrapped around them in case things end with more of a jolt?,” said Danni Hewson, AJ Bell financial analyst.

“A slew of earnings data is heading our way and we’ll finally get a chance to see just how much falling consumer confidence and dwindling discretionary spend has impacted the bottom line of global behemoths, from both the old and new guard,” Hewson added.

Companies presenting their results on Tuesday include Microsoft
MSFT,
+0.98%,
GE
GE,
+2.69%,
Johnson & Johnson
JNJ,
-0.25%,
Verizon
VZ,
-0.93%,
3M
MMM,
+1.63%,
Lockheed
LMT,
-0.45%,
Raytheon
RTX,
+2.00%,
Texas Instruments
TXN,
+2.99%,
and Travelers
TRV,
+0.56%.

The latest bounce for Wall Street has taken the S&P 500 through some important technical milestones — closing above 4,000 and its 200-day moving average — and this may bode well for the medium term, analysts said.

“The 2022 bear market looks to be on thin ice. The SPX’s second straight day higher has successfully broken out above January 2023 highs. This is a positive development which not only has surpassed minor downtrends from last fall, but also is serving to exceed the entire downtrend from last January,” wrote Mark Newton, head of technical strategy at Fundstrat, in a note to clients.

U.S. economic updates set for release on Tuesday include the ‘flash’ S&P U.S. manufacturing and services PMIs for January, due at 9:45 a.m. Eastern.