NASDAQ 100, Dow Jones, S&P 500: Mixed Opening Expected Despite Strong Start to Earnings Season

Highlights

• Stock futures mixed ahead of opening, while Dow notches longest winning streak since 2021.
• Strong start to Q2 earnings, many companies beating expectations.
• Netflix, Tesla, IBM, and United Airlines report after the close.
• Housing starts decline, indicating industry challenges in meeting demand.

Overview

U.S. stock futures were mixed Wednesday shortly before the cash market opening. The pre-market trade has been lackluster even after the Dow Jones Industrial Average notched its longest winning streak since 2021.

At 13:00 GMT, benchmark S&P 500 futures are trading at 4588.00, up 0.25 or +0.01%. The blue chip Dow futures are at 35135.00, down 7.00 or -0.02%, and the tech-weighted Nasdaq-100 futures are trading at 16001.50, up 26.75 or +0.17%.

The Dow notched a seventh straight positive session on Tuesday for its longest string of gains since March 2021. The Dow rose 366.58 points, or 1.06%. The S&P 500 gained 0.71%, while the Nasdaq Composite climbed 0.76%. All three major averages notched their highest closes since April 2022.

Earnings: Goldman Lower while Carvana Soars

Traders continue to eye more corporate earnings this week. Goldman Sachs reported a miss on adjusted earnings per share and a beat on revenue Wednesday, tied to losses in real estate as well as GreenSky. Goldman had previously warned investors that the quarter would likely yield lackluster results. Shares slipped 1.5% in premarket trading.

Carvana shares climbed more than 27% after securing a deal to reduce roughly $1.2 billion in debt. The online auto retailer said Tuesday it will post second-quarter earnings results on Wednesday, moving the date of its report up from Aug. 3.

Traders continue to pore through quarterly reports from major companies. Thus far, the second-quarter earnings season is off to a strong start. Of the companies in the S&P 500 that have reported results, 82% have exceeded expectations, according to FactSet data. Other major companies such as Netflix, Tesla, IBM, and United Airlines will post earnings after the close.

Economic News:  US Housing Starts Decline

In economic news, housing starts tumbled by 8% in June while building permits fell 3.7% as the industry continues to play catch-up with demand. The total seasonally adjusted starts of 1.44 million were less than the 1.48 million Dow Jones estimate, though the percentage drop was less than the 9.3% forecast from May numbers that were revised sharply downward.

Short-Term Outlook:  A Little on Weakside

The second-quarter earnings season has been off to a strong start, with a significant number of companies beating expectations. This positive trend, combined with the recent string of gains in the stock market, has bolstered the case for a soft-landing scenario. Investors are becoming more optimistic about the trajectory of earnings as many sectors, including technology, show signs of reacceleration and growth.

Looking ahead, market participants will closely monitor earnings reports from major companies like Netflix, Tesla, IBM, and United Airlines. These reports will provide further insights into the performance and outlook of different sectors.

However, the economic news regarding housing starts and building permits indicates a decline in the industry, reflecting challenges in meeting demand. This factor may contribute to a more cautious sentiment among investors.

Considering the mixed performance of stock futures and the potential impact of economic indicators, the short-term forecast appears to be neutral or slightly bearish. It remains to be seen how the market will react to the earnings reports and whether the positive momentum can be sustained.

Furthermore, it appears that some of the major players – pensions and institution – are sitting on the sidelines until next week’s Federal Reserve interest rate and policy announcements.