NEW YORK – US stocks were set for a muted open today as investors awaited more bank earnings and views from Federal Reserve policymakers that could shape expectations around when the central bank will pause its monetary policy tightening.
Wall Street closed lower on Friday after mixed economic data appeared to affirm another Fed interest rate hike in May, dampening investor enthusiasm after a series of big US bank earnings launched the first-quarter reporting season.
“Inflation fire has really been put out, but we’re going to continue to pour water over it until we feel confident that it is so,” Sam Stovall, chief investment strategist at CFRA Research said, adding that people were bracing for a deep recession that just might not come.
“Regional bank earnings will come in very slightly positive, while bigger banks will probably post surprisingly positive results.”
Analysts expect profits at S&P 500 companies to have declined 4.8 per cent in the first quarter of 2023 from the year-earlier period, according to Refinitiv data, a slight improvement from last week’s forecast of a 5.2 per cent decline.
The S&P 500 and the blue-chip Dow are trading near two-month highs, following the selloff in March due to the banking crisis and fears about the Fed staying on a hawkish course for longer.
The US central bank is widely seen raising rates by 25 basis points to the 5.00 per cent-5.25 per cent range next month, but recent economic data signaling a slowing US economy have intensified debate over whether it will be the last in this cycle.
Traders’ bets of a 25-bps hike in May have risen to nearly 90 per cent from 78 per cent last week, according to CME Group’s Fedwatch tool.
US Treasury yields touched session highs after data showed business conditions in New York state unexpectedly bounced back to expansion territory in April after slumping in the previous month.
At 8:44 a.m. ET, Dow e-minis were up 35 points, or 0.10 per cent, S&P 500 e-minis were up 1.75 points, or 0.04 per cent, and Nasdaq 100 e-minis were down 3.75 points, or 0.03 per cent.
Alphabet Inc dropped 4.2 per cent in premarket trading following a report that Samsung was considering replacing Google with Microsoft Corp’s Bing as the default search engine on its devices. Microsoft’s shares rose 1.8 per cent.
Prometheus Biosciences Inc rallied 69.9 per cent after Merck & Co said it will buy the biotech company for about $10.8 billion.
Dell Technologies Inc slipped 3.3 per cent as J.P.Morgan downgraded the PC maker’s stock to “neutral”, while HP Inc gained 2.5 per cent after the brokerage upgraded its stock to “overweight”.
State Street Corp fell 10.8 per cent after the custodian bank reported a weaker-than-expected quarterly profit, while financial broker Charles Schwab inched up 0.7 per cent after upbeat results.
