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Although analyst are expecting a majority of the S&P 500 companies to deliver better-than-expected results, fears on inflation and interest rate hikes are dragging stock down.
Earlier on Monday, April 18, the US stock futures took a dive as investors prepare for volatility ahead. Wall Street will kickstart a week of the first-quarter earnings report today.
The futures for the Dow Jones Industrial Average (INDEXDJX: .DJI) dropped 0.18% by 62 points. Similarly, the S&P 500 futures dropped by 0.4% while the Nasdaq Composite (INDEXNASDAQ: .IXIC) futures dropped by 0.73%.
Several blue-chip companies will be disclosing their earnings report ahead of this week. Starting today, Bank of America (NYSE: BAC) will share its earnings report even before the opening bell. Other big names for this week include Dow Inc, Procter & Gamble (NYSE: PG), International Business Machines Corp (NYSE: IBM), American Express (NYSE: AXP), Travelers, Johnson & Johnson (NYSE: JNJ), and Verizon Communications Inc (NYSE: VZ).
Some of the biggest tech companies like Netflix Inc (NASDAQ: NFLX), Tesla Inc (NASDAQ: TSLA), and Snap Inc (NYSE: SNAP) shall be sharing their earnings report this week. Airline companies such as American Airlines Group Inc (NASDAQ: AAL), United Airlines (NASDAQ: UAL), and Alaska Air shall also be releasing their numbers.
As per FactSet, the earnings season will be off to a batter start with 77% of S&P 500 (INDEXSP: .INX) companies likely to report better-than-expected earnings results. Analysts expect that the first-quarter earnings will jump 5% after all S&P 500 companies have finished reporting. In a note to investors on Sunday, April 17, Raymond James’ Tavis McCourt said:
“Our belief remains that 2022E EPS likely comes down a bit through earnings season, but likely less than we would have thought a month ago. And the more U.S.-centric and more services-centric the company, the better the EPS outlook is likely to be”.
Inflation Dragging Stocks Lower
Despite analysts expecting companies to deliver better-than-expected results, Wall street investors continued selling last week. They fear that the soaring inflation and higher interest rates could darken the outlook for earnings.
Last week, the S&P 500 ended at 2.19% down for the second negative week in a row. Similarly, the Nasdaq Composite tanked 2.63% while the Dow Jones fell 0.8%. At the same time, the 10-year Treasury Yield touched a three-year high at 2.83%. This is also weighing on the stock market pulling stocks lower.
Furthermore, investors will be paying close attention to future guidelines, especially how companies shall be handling surging costs. For the month of March 2022, the US CPI Inflation numbers surged by 8.5%, the fastest since 1981. 22V Research’s Gerard MacDonell said:
“The odds seem to be long against underlying inflation moderating to an acceptable pace without a significant deceleration of demand growth”.