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With major banks slated to kick off the earnings season later in
the week, analysts are expecting a 2.2 percent fall in S&P 500
earnings in the first quarter, according to Refinitiv data.
Still, the U.S. Federal Reserve's decision to suspend its
three-year campaign to tighten monetary policy and hopes of a
trade deal with China have lifted the benchmark index to its
highest level since Oct. 9, putting it just 1.6% below its
record closing high.
"While we underestimated the impact of the Fed's pivot on equity
prices, we see the earnings recession as just the beginning,"
Morgan Stanley analysts led by Michael Wilson wrote in a note.
"We think there will need to be some evidence of a real turn in
earnings growth for U.S. stocks to advance much further."
The S&P 500 is trading 16.6 times its next 12-month earnings
estimate, up from 14.6 times during the peak of December
sell-off but below the 17.3 times at its record high hit in late
September.
Taking some air out of Dow futures was Boeing Co, which slipped
4.1% in premarket trading following the planemaker's decision to
cut production of its 737 aircraft by nearly 20%.
At 7:05 a.m. ET, Dow e-minis were down 82 points, or 0.31%. S&P
500 e-minis were down 3.25 points, or 0.11% and Nasdaq 100
e-minis were down 7.75 points, or 0.1%.
Better-than-expected job growth in March helped the S&P 500
clock its best stretch of gains since October 2017. The report
also helped allay fears of an economic slowdown, which has
periodically roiled financial markets over the past year.
Investors are also closely watching for developments in
U.S.-China trade negotiations. The White House said on Friday
after three days of trade talks with Chinese officials in
Washington that the negotiations "made progress on numerous key
issues" but "significant work remains."
Among other stocks, General Electric Co fell 5.3% after
J.P.Morgan downgraded the conglomerate's shares to "underweight"
from "neutral".
Micron Technology was down 1.8% after Cowen and Co cut its
rating on the chipmaker's stock to "market perform" from
"outperform".
Procter & Gamble Co climbed 1.1% after Wells Fargo raised its
rating on the company's stock to "outperform" from "market
perform".
(Reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru;
Editing by Anil D'Silva)
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