Dow Futures Edge Lower After Johnson & Johnson Coronavirus Vaccine Pause; Q3 Bank Earnings in Focus

Wall Street unofficially kicks-off the third quarter earnings season this mornings with updates from JPMorgan, Citigroup and Johnson & Johnson, which surprised markets last night with a pause in its late-stage coronavirus vaccine trial.

The Tuesday Market Minute

  • Global stocks mixed as concerns for a pause in Johnson & Johnson's coronavirus vaccine trial is partly offset by solid China trade data.
  • Johnson & Johnson becomes the second "Operation Warp Speed' trial to pause following the unexplained illness of one of its participants, raising questions about the efficacy of the andenovirus technique.
  • China posts a 13.2% surge in September imports, narrowing its trade surplus with the United States to $30.75 billion.
  • European stocks slide as lockdowns accelerate around the region and a key reading of investor sentiment from Germany disappoints.
  • Oil prices bump higher following the stronger-than-expected China trade data and output returns in Norway and the U.S. Gulf.
  • U.S. equity futures suggest a mixed open on Wall Street ahead of the unofficial start to the third quarter earnings season with updates expected from Johnson & Johnson, JPMorgan, Citigroup and Delta Airlines.

U.S. equity futures were mixed Tuesday following news of a pause in a key coronavirus vaccine trial linked to an unexplained illness as markets brace for the unofficial kick-off to the third quarter earnings season.

Johnson & Johnson  (JNJ) - Get Johnson & Johnson (JNJ) Report said its late stage vaccine trial, which incudes some 60,000 volunteers, has been placed on a temporary pause following the illness, a condition that mirrors a similar decision taken by AstraZeneca  (AZN) - Get Astrazeneca PLC Sponsored ADR Report it its own coronavirus vaccine study last month. 

The news wasn't harsh enough, however, to tame the recent rally in U.S. stocks, which continue to test multi-week highs heading into the start of the third quarter earnings season, with updates from Johnson & Johnson, Citigroup  (C) - Get Citigroup Inc. Report, Delta Air Lines  (DAL) - Get Delta Air Lines, Inc. Report and JPMorgan  (JPM) - Get JPMorgan Chase & Co. (JPM) Report due later this morning.

JPMorgan, in fact, booked a much-smaller-than-expected third quarter credit loss provision of $611 million that, along with stronger fixed income and equity market revenues, helped it smash Street forecasts with a bottom line of $9.4 billion.

Stronger-than-expected trade data from China, as well, gave markets a boost overnight, as that country's customs office reported a 9.9% in September exports, paired by a 13.2% surge in imports, a move that narrowed its trade surplus with the United States by $4 billion to $30.75 billion.

European stocks, however, traded firmly in the red following a disappointing reading of investor sentiment out of Germany, the region's largest economy, and the announcement of a three-tiered lockdown in the United Kingdom, where a resurgence in coronavirus infections is once again triggering travel and business restrictions.

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Still, hopes of a near-term breakthrough on stimulus from lawmakers in Washington, last night's positive momentum from shares in Apple heading into its iPhone reveal event later today and the expectation of solid spending numbers from Amazon's 'Prime Day' shopping even are keeping U.S. stocks markets relatively stable heading into the opening bell.

Futures contracts tied to the Dow Jones Industrial Average suggest an 85 point pullback to start the Tuesday session, while those linked to the S&P 500 suggest a 3 point dip to the downside.

Nasdaq Composite futures, meanwhile, are looking to extend yesterday's gains with another 90 point opening bell advance.

The U.S. dollar index gained 0.1% against a basket of its global peers in overnight trading to change hands at 93.169, while benchmark 10-year Treasury notes rallied 2 basis points to trade at 0.755%.

European stocks drifted south, with losses accelerating following the ZEW investor sentiment survey, pulling the Stoxx 600 0.3% lower in Frankfurt. Britain's FTSE 100 fell 0.2% in London following last night's lockdown orders, with investors also eyeing headlines of a security alert near London Bridge.

China's solid trade data gave oil markets a boost, as did yesterday's return-to-output in the Gulf of Mexico following Hurricane Delta. 

WTI contracts for November delivery, the new U.S. benchmark, traded 71 cents higher from their Monday close in New York and changing hands at $40.14 per barrel while Brent contracts for December, the global benchmark, were seen 62 cents higher at $42.34 per barrel.

Asia's region-wide MSCI ex-Japan benchmark rose back into two-and-a-half year highs following the better-than-expected China trade data and last night's Apple-lead rally on Wall Street with a 0.17% gain, while a modestly weaker yen, and stronger tech stocks, helped lift the Nikkei 225 in Tokyo to a session gain of 0.18% to close at 23,601.78 points.