U.S. Stock Futures Edge Up Ahead of Banks’ Earnings - The Wall Street Journal

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Anna Hirtenstein

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Updated July 14, 2020 6:07 am ET

U.S. stock futures edged up Tuesday as investors awaited second-quarter results from the biggest banks for insights into the health of the American economy and its lenders.

Futures tied to the S&P 500 ticked up 0.3%, suggesting that U.S. stocks could rise after the opening bell. A rally in the equity market on Monday fizzled after California rolled back some of its reopening plans, stoking fears about additional lockdowns.

A string of earnings out on Tuesday from major Wall Street banks is expected to provide more visibility into the effect of the downturn on the flow of credit to businesses, and on borrowers’ ability to repay loans. JPMorgan Chase will kick off the earnings season with its report at about 6:45 a.m. ET, followed by Citigroup and Wells Fargo. Delta Air Lines is also scheduled to release its financial statements at 7 a.m.

Banks’ “business reflects the real economy and their trading activities will show how they have coped,” said Luc Filip, head of private banking investments at SYZ Private Banking. Their results “will be scrutinized by investors very closely.”

In Europe, the pan-continental Stoxx Europe 600 slipped 1.2%, led lower by stocks in Germany and France. Industrial production in the eurozone is recovering slower than expected and is still over 20% lower than last year, according to a Tuesday data release. A gauge of sentiment for institutional investors in July also came in below expectations.

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“It’s the virus-related newsflow at the same time as we’re going into an earnings season that’s unpredictable and we’re getting some weaker economic data, it’s the combination of all these things,” said Georgina Taylor, a multiasset fund manager at Invesco. “Given the good run in equities, it feels like the market is pausing to digest all of this.”

Fresh data showed that the U.K’s economic expansion in May was weaker than economists had expected, and output in Britain remains around a quarter below the level it had reached in February, before the pandemic struck and the economy was shut down. The British pound edged down 0.3% against the dollar, while the FTSE 250 index of stocks dropped 1.3%.

“For the U.K., it’s a tough gig currently. The drop in GDP was starker than on the continent and now the bounceback is weaker,” said Peter Schaffrik, global macro strategist at RBC Capital Markets. “It’s a pretty big miss.”

In Asia, major benchmarks slipped after tensions between the U.S. and China rose, prompted by Secretary of State Mike Pompeo’s comments on Monday that the Trump administration formally rejects a swath of Chinese claims in the South China Sea. China’s main stocks gauge, the Shanghai Composite Index, declined 0.8%.

“As we’re getting closer to the U.S. election in November, we expect some noise to be happening,” said SYZ’s Mr. Filip. “The objective for the U.S. is to show strength, maybe flex muscle.”

Investors are also awaiting consumer price data from the U.S., which is scheduled to be released at 8:30 a.m., and will show if inflation has picked up as lockdowns have eased.

U.S. stocks may face a day of turbulence after the opening bell.

Photo: johannes eisele/Agence France-Presse/Getty Images

In government bond markets, the yield on U.S. 10-year Treasurys slipped to 0.626% Tuesday, from 0.638% Wednesday. Bond yields and prices move in opposite directions.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

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