U.S. stock futures charged higher Monday evening after capping a whipsaw trading session in the red as investors brace for a deluge of earnings reports due out this week.
Contracts on the S&P 500 and Nasdaq rose 0.3% and 0.4%, respectively, after both indexes settled at one-month lows at the closing bell. Futures tied to the Dow Jones Industrial Average jumped 100 points heading into overnight trading. Meanwhile, Treasury yields continued their climb, with the 10-year U.S. benchmark reaching 2.86%, the highest since December 2018.
Quarterly results from 69 companies in the S&P 500 are in the queue for investors to digest through Friday. Big names on the docket of earnings set for release this week include United Airlines (UAL), American Express (AXP) and Tesla (TSLA). Netflix (NFLX), which is slated to report quarterly earnings after market close Tuesday, will provide investors insights into whether subscriber growth at the streaming service has slowed down post-COVID-19.
As of Monday, 53% of 34 S&P 500 companies (comprising 10% of index earnings) that have reported so far beat on both sales and earnings per share, Bank of America’s research team pointed out, slightly better than the typical Week 1 beat rate of 47% and last quarter’s Week 1 rate of 50%. The institution expects a first quarter EPS beat of 4% but anticipates downside risks to the full year 2022 estimates, which imply earnings accelerating every quarter into next year.
“Pressure on profit margins from higher costs for virtually everything, notably labor, materials, and transportation, made this quarter difficult to navigate,” LPL Financial strategists Jeff Buchbinder and Ryan Detrick said in commentary Monday. “Add spillover from the Russia-Ukraine conflict and intermittent COVID-19 lockdowns in China, and companies’ bottom lines are getting hit from several directions.”
“Despite the tough environment, we believe the odds favor companies beating estimates as they have done historically on the back of double-digit revenue growth,” Buchbinder and Detrick added. “High inflation translates into more revenue so earnings can grow at a solid pace even with some narrowing of profit margins.”
Contrary to BofA, research from FactSet suggests that although analysts have tempered their expectations on first quarter earnings, lowering bottom-up EPS forecasts in aggregate for Q1 by 0.7% from $52.21 to $51.83, EPS forecasts for the second, third, and fourth quarters are higher. Earnings estimates for all of 2022 have also risen 2.2% this year to $228.50 per share.
“The number one takeaway for investors should be to watch how your stock reacts more than the news,” Heritage Capital President Paul Schatz told Yahoo Finance Live. “If your stock rallies on bad news, that’s a pretty good sign the markets have absorbed and digested and have priced in the bad news.”
6:13 p.m. ET: Futures jump as earnings season sets into full swing
Here were the main moves in markets heading into overnight futures trading Monday:
S&P 500 futures (ES=F): +14.25 points (+0.32%) to 4,401.00
Dow futures (YM=F): +104.00 points (+0.30%) to 34,417.00
Nasdaq futures (NQ=F): +59.50 points (+0.43%) to 13,967.25
Crude (CL=F): -$0.77 (-0.71%) to $107.44 a barrel
Gold (GC=F): -$4.90 (-0.205%) to $1,981.50 per ounce
10-year Treasury (^TNX): +3.4 bps to yield 2.8620%
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc