**Futures Flat In Quiet Session As Attention Turns To Company Earnings**
Futures Flat In Quiet Session As Attention Turns To Company Earnings
US stock futures are off to a muted start to the week as investor focus turns to first-quarter earnings for clues on the health of corporate America amid the Fed's own admission it is hoping to trigger a recession in the coming months. Futures on the Nasdaq 100 and the S&P 500 were both up a modest 0.1% following Friday's drop despite better-than-expected quarterly reports from the big banks as markets were unnerved by Fed Governor Christopher Waller’s hawkish comments favoring further policy tightening. His views caused investors to ramp up bets on another rate rise in June, following one in May, and also to scale back expectations for rate cuts later in the year. In Europe too, the Stoxx 600 Index erased an earlier gain.
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Among notable premarket movers, Chinese EV maker XPeng soared after the firm unveiled a plan to cut manufacturing costs at the Shanghai International Auto Show. Other US-listed Chinese stocks also rise, rebounding from last week’s slump. **Prometheus Biosciences shares surged as much 71% in US premarket trading after Merck struck a deal to buy the biotech company for around $10.8 billion,** though traded slightly below the $200/share offer. Analysts were positive on the deal despite its 75% premium to Prometheus’s closing price last Friday, saying that it will help Merck to diversify away from its traditional focus on oncology, while brokers saw no obstacles to the transaction going through. Here are the most notable pre-market movers:
- Alphabet fell as much as 2% in premarket trading on Monday after a report said Microsoft’s Bing might replace Alphabet’s Google as the default search service on Samsung Electronics devices.
- Cryptocurrency-exposed stocks fall in US premarket trading as Bitcoin dips below the $30,000 mark, with the digital token remaining in a range after breaching the closely watched level. Cipher Mining -3.8%, Riot Platforms -5.2%.
US stocks have swung around in a tight range in April after a strong rally in the first quarter as investors veered between worries about a recession and bets that cooling inflation would prompt the Federal Reserve to stop rate hikes soon. Corporate earnings will provide the next clue about the impact of slowing growth, with analysts expecting the biggest year-on-year decline since 2020.
Richard Hunter, head of markets at Interactive Investor, said market participants have remained cautious despite the strong showing from the big banks as economic data suggest the Fed could hike rates again at its next meeting. Recent data points to inflation and employment markets steadily softening, encouraging some equity bulls. First-quarter earnings from JPMorgan and Citigroup also outpaced expectations on Friday.
“After the data last week, there is a less pressing need to hike rates, plus there is an apparent easing in banking tensions,” said Peter Kinsella, head of FX strategy at Swiss asset manager UBP. “If we get a Fed rate hike in May, I think it will be one and done.”
Despite this, Kinsella predicts headwinds for equity markets from share valuations that remain expensive, especially in relation to a slowing economy. Investors are preferring to park their cash in money-market funds, he noted.
“The current season’s earnings profile is rather opaque,” Kinsella added. “The banks last week did better than expected, but we have to see what the reporting season will be like from everyone else. But the S&P is expensive at current levels so you have to ask yourself if there is really much material upside from here.”
Meanwhile, Morgan Stanley strategist Michael Wilson once again - and for the 6th month running - said profit expectations were still too high even as that has been long factored into prices. The strategist also warned - as per usual - that the S&P 500 was at risk of further declines as the percentage of stocks outperforming the index on a three-month rolling basis was at a record low. Wilson sees the biggest risk to the rally in technology stocks if bond yields rise. The tech-heavy Nasdaq 100’s so-called MACD momentum — which shows the relationship between two moving averages of a security’s price — is now weakening, Bloomberg noted while Goldman's Prime Brokerage notes that "franchise flows have shifted to local selling of tech this week and **Nasdaq is only up in two of the past ten sessions (also note that it stands exactly where it stood in ... the spring of 2021)."**
European stocks are on course to extend their winning streak to six sessions as investors turn their attention to earnings season…
https://www.zerohedge.com/markets/futures-flat-quiet-session-attention-turns-company-earnings