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Dow Futures Test New Record Highs, Oil Gains on Colonial Pipeline Hack

March quarter earnings grew more than 50% from last year to $407.1 billion, pegging U.S. stocks at record highs heading into what is traditionally the toughest stretch of the year.

The Monday Market Minute

  • Global stocks grind higher as the U.S. earnings season draws to a close, with investors eyeing inflation signals and recovery momentum following last week's disappointing April jobs report.
  • U.S. stocks are entering the traditionally difficult May to October period riding all-times highs, fueled by Fed support and stronger-than-expected corporate profits.
  • With 88% of the S&P 500 reporting March quarter earnings, profits are expected to rise 50.4% from last year to a share-weighted $407.1 billion.
  • Around 18 S&P 500 companies are expected to report this week, including Disney, Marriott, Coty and Nordstrom.
  • CDC data shows 114.3 million Americans have now been fully vaccinated against the coronavirus, with around 259.7 million doses administered as of Wednesday.
  • U.S. equity futures suggest a mixed open on Wall Street heading into a quiet week for earnings and data, highlighted by inflation data on Wednesday and Disney's March quarter profits on Thursday.

Wall Street futures traded mixed Monday, with tech stocks again lagging broader market gains as Treasury yields grind higher heading into what is traditionally one of the toughest portions of the year for U.S. stocks.

With the first quarter earnings season drawing to a close, and the lull of the summer months just a few weeks away, investors are bracing for the typical headwinds stock markets face between May and October, when gains have historically lagged those recorded for the rest of the year by as much as 25%. 

This year's post-May period could be different, however, given that the country is expected to exit the worst of the coronavirus pandemic in the coming months -- CDC data from Sunday shows that nearly 35% of Americans have been fully vaccinated -- and the Federal Reserve's full-throated support for both bond market purchases and low interest rates will likely remain untested given last week's disappointing jobs report. 

Corporate earnings have been much stronger than expected, as well, and with 88% of the S&P 500 reporting for the March quarter, profits are up 50.4% from last year to a share-weighted $407.1 billion, with second quarter forecasts calling for a 61.2% gain from 2020 to $370.6 billion.

So with supportive monetary policy underpinning solid fundamentals, and lawmakers debating the size of a multi-trillion infrastructure bill, stocks are in a good place heading into the throes of the "Sell in May" momentum, even after hitting record highs last week. 

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Monday's market action, however, looks muted, with futures contracts tied to the Dow Jones Industrial Average indicating a 120 point opening bell gain and those linked to the S&P 500, which is up 12.7% for the year, priced for a 5 point bump to the upside.

Nasdaq Composite futures, meanwhile, look set for a 45 point retreat as benchmark 10-year note yields bump up to the 1.6% mark at 1.583% following faster-than-expected wage increases in last week's otherwise grim April jobs report.

Oil and gas prices were active, however, following the late Friday cyberattack on the Colonial Pipeline, a key energy market artery that transfers refined fuel products up and down the east coast.

Colonial said most of its network remains offline Monday, telling shippers that it will "bring our full system back online only when we believe it is safe to do so, and in full compliance with the approval of all federal regulations".

WTI crude futures for June delivery were marked 68 cents higher at $65.58 per barrel while Brent futures for July rose 80 cents to $69.08 per barrel. Gasoline futures for June were up 1.6% at $2.16 per gallon. 

Cryptocurrency prices were also on the move, with Ethereum rising to a fresh record high and past the $4,000 mark while Dogecoin attempted to claw back some of the billions in market value it lost after plunging 36% to 42 cents each following comments from Tesla  (TSLA) - Get Tesla Inc Report founder and CEO Elon Musk during his appearance on Saturday Night Live over the weekend. 

Elsewhere, European stocks were largely flat in mid-day trading Monday trading, with the Stoxx 600 up 0.07% in Frankfurt, while Asia stocks had a firmer start to the week with a 0.55% gain for the Nikkei 225 in Tokyo and a 0.52% bump for the region-wide MSCI ex-Japan benchmark.