Traders work on the floor of the New York Stock Exchange (NYSE), July 26, 2023.
Brendan McDermid | Reuters
Stock futures retreated Tuesday as a decline in bank shares dampened investor sentiment.
Futures tied to the Dow Jones Industrial Average ticked lower by 191 points, or 0.5%. S&P 500 futures and Nasdaq 100 futures were down 0.5% each.
Bank shares fell broadly after Moody’s downgraded the credit rating on several banks, including M&T Bank and Pinnacle Financial. The credit agency also placed Bank of N.Y. Mellon and State Street on review for a downgrade.
Goldman Sachs and JPMorgan Chase traded lower in the premarket. The SPDR S&P Bank ETF (KBE) slipped 2.3% in the premarket, while the SPDR S&P Regional Banking ETF (KRE) dipped 2%.
Earnings season continued. UPS shares dropped more than 5% after the delivery giant reported weaker-than-expected revenue for the second quarter. The company also lowered its full-year revenue outlook. Educational tech company Chegg popped about 23% after reporting second-quarter revenue of $183 million, beating analysts’ estimate of $177 million, per Refinitiv.
The corporate earnings season has so far been better-than-expected. Roughly 86% of S&P 500 stocks have reported quarterly results, and nearly 80% of them have beaten Wall Street’s expectations, according to FactSet.
“The good news is that the earnings trough/recession is likely coming to an end, with earnings growth expected to accelerate over the coming quarters,” said Dylan Kremer, co-chief investment officer at Certuity. “Looking ahead, earnings projections seem a bit lofty to us relative to revenue growth estimates, particularly starting in Q1/24.”
On the economic data front, traders are looking ahead to July’s consumer price index report, out Thursday. The inflation metric could put Wall Street’s belief in a soft landing to the test. Economists polled by Dow Jones are calling for a monthly increase of 0.2% in July and a year-over-year rise of 3.3%.
Wall Street is coming off a strong performance Monday. The 30-stock Dow surged more than 400 points, or nearly 1.2%, for its best day since June 15. The Nasdaq Composite added 0.6%, and S&P 500 closed higher by 0.9%. The tech-heavy Nasdaq and the S&P 500 broke four-straight sessions of losses.
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