U.S. stock indexes were set to open lower on Tuesday as corporate reports from bellwethers including 3M, Johnson & Johnson and GE pushed earnings season into high gear, while chip companies retreated after bouncing in the previous session.
In a week packed with high-profile earnings reports and key economic data, investors will now look to assess the impact of the Federal Reserve’s rate-hiking spree. The central bank is widely expected to raise rates by another quarter of a percentage point next week.
Johnson & Johnson (JNJ.N) shares fell 1.4% after the healthcare giant warned that its medical devices business would be hit by China’s COVID-19 surge in the first half of 2023, even as it beat estimates for fourth-quarter profit.
General Electric Co (GE.N) rose 2.2% as it topped quarterly profit estimates, boosted by strong demand for its engines and after-market services.
“It’s going to be earnings now that will direct the market’s direction and as far as today is concerned, we’re looking at a mixed session,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
Wall Street’s main indexes started the earnings-heavy week on solid ground amid renewed appetite for growth stocks following a battering last year.
After logging its biggest gain in over two months on Monday, Advanced Micro Devices Inc (AMD.O) slipped 2.6% as brokerage Bernstein downgraded the chipmaker to “market-perform” from “outperform” citing a bleak outlook for the PC market.
Shares of Microsoft Corp (MSFT.O), which is scheduled to report quarterly earnings after the bell, were flat.
Big Tech earnings could also determine whether renewed enthusiasm for growth stocks will be sustained.
“In the near-term, the answer seemingly lies with tech earnings … longer-term, if we do experience a Fed pivot this year, then would anticipate a strong, positive buying impulse for tech,” JPMorgan analysts wrote in a client note.
Analysts now see fourth-quarter earnings for S&P 500 companies dropping 3% year-on-year, nearly twice as much as the 1.6% annual drop seen at the beginning of the year, according to Refinitiv data.
At 8:10 a.m. ET, Dow e-minis were down 96 points, or 0.28%, S&P 500 e-minis were down 10.25 points, or 0.25%, and Nasdaq 100 e-minis were down 48.75 points, or 0.41%.
Other major growth stocks also dipped, with Alphabet Inc (GOOGL.O) falling 1.1%. The U.S. Justice Department is poised to sue Google as soon as Tuesday, according to a report, regarding its dominance over the digital advertising market.
Data from S&P Global later in the day will likely show flash manufacturing PMI fell to 46.0 in January from a final reading of 46.2 in December, while flash services PMI rose to 45 this month from 44.7 in December.