By Sruthi Shankar and Shristi Achar A
(Reuters) – Futures tracking U.S. stock indexes were largely muted after Walt Disney slipped following second-quarter results, while expectations of the Federal Reserve’s interest rate cuts this year lent support to the market.
Walt Disney fell 6.2% in premarket trading, as a surprise profit in its streaming entertainment division was eclipsed by a drop in its traditional TV business and weaker box office.
“Corporates’ earnings continue to beat expectations, but share price action has remained neutral post earnings beats,” Nicole Inui, head of equity strategy, Americas at HSBC said in a note.
“Going forward, we expect the market to turn its focus more on earnings as the volatility around interest rate expectations subsides.”
Kenvue gained 3.2% after the Band-Aid maker beat first-quarter profit estimates and said it would cut 4% of its global workforce.
The three main U.S. stock indexes closed at their strongest level in more than three weeks on Monday, after a weaker-than-expected labor market report last week fueled bets that the U.S. central bank will ease monetary policy later this year.
The report and better-than-expected earnings reports helped soothe jittery investors, who sent markets lower in April, on concerns that sticky inflation and a robust economy would prompt the Fed to keep rates higher for longer
Of the nearly four-fifth of the S&P 500 companies that reported first-quarter results through Friday, 76.8% topped analysts’ profit estimates, as per LSEG data. In a typical quarter, 67% beat earnings estimates.
Traders currently anticipate rate cuts of 45 basis points (bps) from the Fed by the end of 2024, according to LSEG’s interest rate probabilities app, with the first pivot to a 25 bps rate cut priced in for September and another in December.
The tech-heavy Nasdaq 100 futures dipped on Tuesday as most megacap and technology firms came under pressure following Apple and Tesla updates.
Nvidia fell 1.1% after the Wall Street Journal reported that Apple was developing its own chip to run artificial intelligence (AI) software in data centers.
Apple gained 0.6% ahead of an event later on Tuesday where it is expected to unveil new iPads.
Tesla fell 1.5% after data showed the U.S. automaker sold 62,167 China-made electric vehicles in April, down 18% from a year earlier.
At 07:20 a.m. ET, Dow E-minis were up 26 points, or 0.07%, S&P 500 E-minis were mostly unchanged and Nasdaq 100 E-minis were down 35 points, or 0.19%.
Investors will also keep an eye on Minneapolis Fed President Neel Kashkari’s speech later in the day. Richmond Fed President Thomas Barkin said on Monday finishing the battle against inflation will likely require a hit to demand, while his New York counterpart John Williams said that at some undefined point the U.S. central bank will lower its interest rate target.
Among other stocks, Palantir Technologies tumbled 11.8% after the data analytics firm’s annual revenue forecast fell short of analysts’ estimates.
(Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru; Editing by Shinjini Ganguli)
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