Dow Futures Gain Ahead of Q2 Earnings Kick-Off; U.S. Coronavirus Cases Continue to Surge

S&P 500 companies are expected to report a collective 44% decline in second quarter profits this earnings season, which will kick-off with JPMorgan and Citigroup on Tuesday.

The Monday Market Minute

  • Global stocks follow Wall Street's Friday rally, triggered by hopes of a near-term coronavirus treatment, with broad gains in Europe and Asia.
  • U.S. earnings season kicks-off this week with reports from JPMorgan and Citigroup, as well as the start of the FAANG reprots from Netflix on Thursday.
  • U.S. coronavirus infections rise at a record 62,100 pace Sunday, lead by a 15,000 surge in Florida, while Mexico surpasses Italy in COVID-19 fatalities with 35,000
  • Pfizer says it gets FDA 'fast track' approval for two of its nascent coronavirus vaccine candidates.
  • Oil prices retreat ahead of a meeting of OPEC advisers later this week that is expected to guide the cartel towards easing its current supply cut agreement.
  • U.S. equity futures suggest a firmer open on Wall Street ahead after stronger-than-expected earnings from PepsiCo before the start of trading.  

Wall Street futures edged higher Monday, while the dollar extended declines and oil prices slumped, as investors prepared for a hectic week of economic data, corporate earnings and central bank meetings against a backdrop of rising coronavirus infection rates and an uncertain second half outlook. 

JPMorgan  (JPM) - Get Report and Citigroup  (C) - Get Report will kick-off a second quarter earnings season on Tuesday that is likely to confirm a 44% decline in collective profits for S&P 500 companies, nearly all of which have been hit by lockdowns and closures triggered during the first peak of the pandemic in late March.

Forward-looking statements released alongside the earnings, meanwhile, could provide a window into how company bosses are assessing the potential of a so-called V-shaped economic recovery, although that view might be clouded by the fact that U.S. coronavirus infections are rising at a record pace, including a 15,000 surge in Florida yesterday, although the rate of increase per million is starting to decline.

The economic implications of the second wave are pretty clear, qualitatively at least. The third quarter recovery will be slower than we previous expected, but we're hoping that some of the deferred spending will be pushed into the fourth quarter rather than abandoned altogether," said Ian Shepherdson of Pantheon Macroeconomics. "July payrolls likely will rise, though probably at a slower rate than in June, but August is anyone's guess; we can't rule out an outright decline."

Futures contracts linked to the Dow Jones Industrial Average, which rallied more than 360 points Friday following positive Phase 3 data from Gilead Sciences'  (GILD) - Get Report study of remdesivir, a coronavirus treatment, suggest another 235 point opening bell gain Monday, while those linked to the S&P 500, which is down 1.4% for the year, indicate a 24 point bump after stronger-than-expected earnings from PepsiCo.  (PEP) - Get Report prior to the start of trading.

The U.S dollar index, which tracks the greenback against a basket of six global currencies, slipped 0.12% ower in the overnight session, extending its losses into a third consecutive week, while benchmark 10-year Treasury note yields eased to 0.637% during the Asia trading session.

The dollar weakness failed to support oil prices, however, which drifted further south Monday ahead of a meeting of OPEC's Joint Ministerial Monitoring Committee, a technical group which advises the cartel's leaders, later this week. 

The JMMC is expected to suggest an easing of supply cuts following last week's increase to its global demand forecast from the International Energy Agency. 

WTI contracts for August delivery, the U.S. benchmark, traded 71 cents lower from their Friday close in New York and were changing hands at $39.84 per barrel in early European dealing while Brent contracts for August, the global benchmark, were seen 57 cents lower at $42.63 per barrel.

European stocks opened the week on a firmer note, with the Stoxx 600 rising 0.56% in early trading ahead of a European Union summit later this week that will decide the fate of the region's $1.2 trillion coronavirus rescue fund, as well as a European Central Bank policy meeting Thursday in Frankfurt. 

Overnight in Asia, China stocks extended their week-long rally, sparked by an editorial in a state-controlled newspaper last Monday, with a near 1.8% gain for the Shanghai Composite and a 2.1% advance for the tech-heavy CSI300 in Shenzen. Japan's Nikkei 225, meanwhile, closed 2.22% higher at 22,784.74 points.