(Bloomberg) — U.S. stock futures posted small gains as the busiest week of earnings season gathered pace, with hopes for a lasting rally hinged on whether big tech can justify high valuations inspired by the artificial intelligence boom.
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Contracts on the S&P 500 and Nasdaq 100 edged up about 0.3% after Wall Street rebounded from a $2 trillion selloff. Early results Tuesday were mostly positive, with shares of United Parcel Service Inc. and General Motors Co. rising in premarket trading after stronger earnings. PepsiCo Inc. fell after reporting lower volumes in North America.
But the main event will be the “Magnificent Seven” cohort of tech mega-caps, with Tesla Inc. expected to be the first to report after today’s market close. Next up will be Meta Platforms Inc. on Wednesday, followed by Microsoft Corp. and Alphabet Inc. on Thursday.
Earnings will remain in focus for investors this week, with around 180 companies – representing more than 40% of the S&P 500’s market value – reporting results. The focus on corporate profits comes after a rout fueled by geopolitical fears and indicates the Federal Reserve will be in no rush to cut rates.
“Whether markets continue to consolidate from now on will likely depend on assessing the sustainability of AI demand after the earnings release,” said Eddie Cheung, senior strategist at Crédit Agricole CIB.
The Stoxx Europe 600 index rose 1%, with the technology sector leading the advance. SAP SE jumped more than 4% as booming demand for artificial intelligence fueled the German software maker’s growth. Drugmaker Novartis AG added as much as 5% after raising its full-year forecast.
Tuesday’s PMI data reinforced the positive mood in Europe. Private sector activity reached its highest level in almost a year, driven by the dynamism of the services sector and the return to growth in Germany. Barring any economic surprises, a rate cut in June is a “fait accompli,” said Luis de Guindos, vice-president of the European Central Bank.
“We remain focused on the current earnings season, which could refocus investors’ attention on strong underlying fundamentals,” Citigroup Inc. strategists Mihir Tirodkar and Beata Manthey wrote in a note. “We would view the recent pullback as a buying opportunity.”
Treasuries were flat ahead of a wave of bond auctions that will test investors’ appetites after yields hit their highest level in 2024. The greenback gauge was little changed.
Gold extended losses after its biggest daily decline in almost two years, with tensions easing in the Middle East and signs the Fed will keep rates higher to curb demand for longer. Oil plunged as traders assessed next steps between Israel and Iran, amid signs of easing hostilities after an exchange of attacks last week.
High multiples
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