US stock futures rose Wednesday morning as investors watched a series of closely-watched earnings reports and further digested hot pressures on US inflation
Contracts on the S&P 500 rose as the index appeared to end a three-day losing streak. Dow and Nasdaq futures also rose in premarket trading.
Investors received a slew of earnings reports from some of the major US companies and stock index components on Wednesday. These included JPMorgan Chase (JPM) – the largest US bank by assets – along with Delta Air Lines (DAL) and Bed, Bath & Beyond (BBBY).
Jamie Dimon, CEO of JPMorgan Chase, offered a cautiously optimistic view of the US economy in Wednesday’s bank results release. Dimon noted that while he remains “optimistic on the economy, at least in the short term,” he still sees “significant geopolitical and economic challenges” due to high inflation, supply chain issues and the war in Ukraine. And the bank also increased its loan reserves by a net $902 million, “primarily due to the higher probability of downside risk,” Dimon said.
Meanwhile, Delta Air Lines, one of the major airlines at the center of the reopening trade, hinted that business would continue to pick up in the current quarter, although first-quarter results showed another loss as the airline previously tied up with the Omicron variant wave had fight year. The airline returned to profitability in March, Delta noted, noting that revenue in the current quarter, which ended in June, is expected to be between 92% and 97% of pre-pandemic levels.
These early earnings reports helped set the tone for what is expected to be a much softer quarter for earnings growth than recent periods. As companies grapple with rising labor, raw material and transportation costs and overtake last year’s initial surge in activity fueled by reopening, many on Wall Street are looking for lower margins than recent quarters, even as sales in the face of increased and rising consumer demand, prices continue sharply. Across the S&P 500, companies as a whole are expected to report annual earnings growth of just 4.5%, which would represent the slowest rate since the fourth quarter of 2020, according to FactSet.
The story goes on
“This earnings season is going to be one of the most important earnings seasons because it’s going to give you a lot of insights into which companies … have this consistent demand, which companies have this pricing power,” Kristen Bitterly, Citi’s head of global wealth investments, told Yahoo Finance Live on Tuesday.
“Even in decades like the 1970s, when we had extreme inflation, high-quality, large-cap US stocks were able to double their share price over that period,” she added. “So that’s the niche market that we’re confident in either staying invested in or being invested in.”
Indeed, inflation remains a key concern for investors and threatens to further weigh on both consumer wallets and corporate profits. The Bureau of Labor Statistics’ Consumer Price Index (CPI) for March showed that inflation rose last month at the pace it had seen in late 1981 and rose slightly faster than expected year-on-year by 8.5%.
However, some economists suggested that the report was not all bad news and showed some preliminary signs of a peak in the rate of inflation.
“I think there’s actually a little bit more good news in the CPI report than it appears right on the surface…there are a number of things here that suggest we’re starting to see inflation peak, and we will over the next few months,” Tom Simmons, fixed income money market economist at Jefferies, told Yahoo Finance Live on Tuesday.[It’s] It is important to remember that the CPI for March was the reference period here right after the Russian invasion of Ukraine. So it really captures the sharpest phase of gas price hikes. And we’ve seen that they’ve already eased off a bit in the market over the past few weeks.”
“The other thing is that non-energy services — and if you take out the airline component — were actually a little bit softer than the last few months, too,” he added. “Actually, housing construction has also weakened somewhat in recent months, and non-energy goods are also weakening somewhat. So you know the consumer weathered the storm pretty well here, inflation.”
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7:20 am ET: Stock futures rise amid gains
Here’s where the shares were trading on Wednesday morning:
S&P 500 Futures (ES=F): +26.5 points (+0.6%) to 4,419.50
Dow Futures (YM=F): +172 points (+0.5%) to 34,311.00
Nasdaq futures (NQ=F): +110.75 points (+0.79%) to 14,055.75
raw (CL=F): +$1.45 (+1.44%) to $102.05 a barrel
Gold (GC=F): +$4.20 (+0.21%) to $1,980.30 per ounce
10-year government bonds (^TNX): +0.6 basis points for a return of 2.733%
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7:03 am ET: JPMorgan reports mixed Q1 results as investment banking revenue declines from last year
JPMorgan Chase released mixed first-quarter results, with total adjusted sales beating Wall Street estimates while some large companies within the bank showed some moderation.
Adjusted sales of $31.6 billion fell 4.6% year over year but beat consensus estimates of $31.4 billion, according to Bloomberg data. Fixed income sales and equity sales and trading both beat expectations while declining year-over-year, totaling approximately $5.7 billion and $3.1 billion, respectively. However, investment banking revenue fell a more significant 28%, missing estimates at a total of $2.06 billion, as underwriting activity for stocks and debt earlier this year fell from a year earlier.
CEO Jamie Dimon also noted that the banks’ core lending business remained solid during the quarter.
“Credit strength held up, with average company-wide loans up 5% while loan losses remain at historically low levels,” Dimon said in the earnings release.
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6:50 am ET: Delta shares are higher after the airline posts a smaller-than-expected Q1 loss and returns to profitability in March
Delta Air Lines shares rose in the premarket session after the airline released estimates and beat first-quarter results, which included a smaller-than-expected loss.
Adjusted losses were $1.23 per share for the March quarter, or less than consensus analysts posted a loss of $1.26 per share, according to Bloomberg data. Adjusted revenue was $8.2 billion, a 79% recovery compared to the same quarter in 2019 before the pandemic. Capacity has been restored by 83% compared to pre-pandemic times, Delta added.
For the current quarter ending in June, Delta expects capacity to recover further to 84% of the June 2019 quarter level with total revenue between 93% and 97% of the level from that period in 2019.
“With a strong recovery in demand as Omicron slowed, we returned to profitability in March and delivered a solid adjusted operating margin of nearly 10%,” Delta CEO Ed Bastian said in the company’s news release Wednesday morning. “As our brand preference and demand momentum increases, we are successfully conquering higher fuel prices and advancing our guidance for an adjusted operating margin of 12% to 14% and strong free cash flow in the June quarter.”
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6:10 p.m. ET Tuesday: Stock futures are heading for a lower open
Here’s where the markets traded before the opening bell on Tuesday night:
S&P 500 Futures (ES=F): +4.25 points (+0.1%) to 4,397.25
Dow futures (YM=F): +33 points (+0.1%) to 34,172.00
Nasdaq futures (NQ=F): +17.75 points (+0.13%) to 13,962.75
NEW YORK, NEW YORK – APRIL 12: Traders work on the floor of the New York Stock Exchange during afternoon trading on April 12, 2022 in New York City. Data released this morning showed inflation rose 8.5 percent in March, the highest annual rise since December 1981, as energy prices soared due to the Russian war in Ukraine. (Photo by Michael M. Santiago/Getty Images)
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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