U.S. stock futures fell, suggesting major indexes will extend losses as investors assess blue-chip companies’ profits and sales prospects.
Futures tied to the S&P 500 and the Dow Jones Industrial Average retreated almost 0.5%, pointing to a second day of losses after the opening bell. Technology-heavy Nasdaq-100 futures dropped 0.4%.
Investors are looking to companies’ first-quarter earnings and their outlooks for the rest of the year to gauge whether valuations on stocks are justified. Strong U.S. economic data has bolstered expectations and fueled the recent rally that has left major indexes hovering close to record highs. Rising Covid-19 infection levels in some countries and signs that the vaccine rollout may be faltering are now tempering that optimism.
“All these company share prices are near or close to record highs and we are seeing a lot of people taking money off the table,” said Michael Hewson, chief market analyst at CMC Markets. “There is a general lack of impetus.”
Ahead of the opening bell, United Airlines fell 2.2% after reporting weaker than expected results for the first quarter. Tesla fell a further 1%. The auto maker slipped 3.4% on Monday following a fatal crash involving one of its vehicles.
Investors entered earnings season with high expectations, particularly for economically sensitive stocks such as banks and retail that stand to win the most from the economy reopening.
“Companies are doing even better than was expected—which in many ways is shocking—but that is also one of the reasons why the market is at an all-time high,” said Andrew Slimmon, a senior portfolio manager at Morgan Stanley Investment Management. “The earnings season is validating what a lot of companies’ stock prices have already been saying.”
and
are among companies scheduled to report earnings before the market opens.
is expected to post its results after markets close.
“The only risk is that expectations across the board are so high, they are going to be very difficult to meet,” said
Seema Shah,
chief strategist at
“We are getting into territory—both with earnings and economic data—where it will be very difficult to have positive surprises.”
Investors are also keeping an eye on the bond market, with yields climbing for a third consecutive day. The 10-year U.S. Treasury yield edged up to 1.622%, from 1.599% Monday. Yields rise as prices fall.
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