Dow Futures Gain As JPMorgan Q2 Earnings Impress: U.S.-China Tensions, Coronavirus Surge Caps Gains

Bank earnings will likely dictate market direction Monday, with JPMorgan, Citigroup and Wells Fargo set to report June quarter profits before the opening bell.

The Tuesday Market Minute

  • Global stocks slide following last night's sell-off on Wall Street as worldwide coronavirus infections top 13 million.
  • U.S. infections continue to surge to 3.3 million, with 135,000 deaths, triggering business closures in California and questions over the pace of the domestic economic recovery.
  • China trade data surprises to the upside, with imports rising 2.7%, but U.S. trade surplus remains elevated at $29.4 billion in June. 
  • Oil prices extend retreat as dollar finds buyers and investors question demand strength, with OPEC ministerial meeting slated for Wednesday.
  • U.S. equity futures suggest a firmer open on Wall Street ahead second quarter earnings from JPMorgan, Citigroup and Wells Fargo and June inflation data at 8:30 am Eastern time.

U.S. equity futures edged higher Tuesday, following on from a wild session on Wall Street yesterday that saw the Dow give back nearly 600 points in a late afternoon slump, as investors track bank earnings, U.S.-China tensions and accelerating coronavirus infections in major economies around the world.

Traders could still be rattled from yesterday's sell-off, however, as well as a steady increase in the CBOE's key volatility gauge, the VIX, are likely to keep investors cautious heading into the start of trading.

JPMorgan  (JPM) - Get Report, however, could have steadied those nerves after the biggest U.S. bank posted stronger-than-expected second quarter earnings, and held onto its quarterly dividend, despite setting aside a massive $10.5 billion in credit loss provisions.  

However, a faster-than-expected reading of June inflation, which accelerated to 0.6%, kept gains in check.

After hitting its highest levels since February 25 yesterday afternoon, the S&P 500 slumped into negative territory by the close of trading, lead to the downside by profit-taking in big tech names such as Amazon  (AMZN) - Get Report, Microsoft  (MSFT) - Get Report and Facebook  (FB) - Get Report.

The moves suggest investors might be ready to put a cap on recent gains, which have seen stocks rise nearly 40% since their late March nadir, if second quarter earnings -- and profit guidance heading into the end of the year -- disappoint. 

Rising coronavirus infection rates could certainly affect earnings visibility, with bars and restaurants closing in California, school openings delayed in Los Angeles and pockets of new outbreaks recorded in Australia and the United Kingdom.

Globally, more than 13 million cases have been recorded since the outbreak began in early January, with more than a million confirmed in the past five days alone.

U.S.-China tensions, which have intensified in the past week as Washington criticizes Beijing's handling of the outbreak, its interference in Hong Kong politics and its claim to offshore resources in the South China Sea, could also add to the broader market caution which kept a lid on overnight gains in markets around the world. 

Wall Street still looks set for a positive open, however, with futures contracts tied to the Dow Jones Industrial Average priced for a modest 30 point gain and those linked to the S&P 500 suggesting a 4 point advance at the start of trading.

European stocks, however, slumped lower into the start of trading, extending declines recorded overnight in Asia, even as investors cheer stronger-than-expected trade data in China and looked to positive signs that the European Union would approve a $1.2 trillion coronavirus stimulus package later this week.

The Stoxx 600 Europe benchmark, the region's broadest measure of share prices, was marked 1.3% lower in early trading, lead to the downside by a 1.5% decline in Germany's DAX performance index and a 0.33% slip for Britain's FTSE 100. 

Overnight in Asia,  China customs officials said June exports rose by a surprise 0.5% from last year, while imports jumped 2.7%, suggesting both improving domestic demand and a stronger factory rebound in the world's second-largest economy.

China's trade surplus with the United States, a long-time focus of President Donald Trump, was pegged at $29.4 billion, down only $500 million from the same period last year and up from $27.8 million in May.

In stocks, the region-wide MSCI ex-Japan benchmark fell 1%, paced by declines in Hong Kong and Shanghai, while Japan's Nikkei 225 ended the session 0.87% lower at 22,887.01 points.

Global oil prices also extended declines Tuesday, despite the stronger China trade data, as a firmer U.S. dollar and the specter of an easing in OPEC production cuts later this week kept bulls at bay.

WTI contracts for August delivery, the U.S. benchmark, traded 26 cents lower from their Monday close in New York and were changing hands at $39.77 per barrel in early European dealing while Brent contracts for August, the global benchmark, were seen 26 cents lower at $42.46 per barrel.