Futures subdued as investors eye bank earnings, Fed cues

[April 17, 2023]  (Reuters) - U.S. stock index futures were largely flat on Monday as investors awaited more bank earnings and views from Federal Reserve policymakers that could shape expectations around when the central bank will pause its monetary policy tightening.

Wall Street ended lower on Friday as a barrage of mixed economic data appeared to affirm another Fed interest rate hike in May, dampening investor enthusiasm after a series of big U.S. bank earnings launched the first-quarter reporting season.

While banking heavyweights including JP Morgan Chase & Co reaped windfalls from higher interest payments, focus will be on smaller banks that were at the center of the banking turmoil last month as well as forecast from companies amid worries of a recession.

Major U.S. banks including Goldman Sachs Group Inc, Bank of America Corp, Morgan Stanley will report through the week, while Charles Schwab Corp and State Street Corp are among the financial companies reporting before the opening bell on Monday.

Analysts expect profits at S&P 500 companies to have declined 4.8% in the first quarter of 2023 from the year-earlier period, according to Refinitiv data on Friday, a slight improvement from the 5.2% decline forecast a week ago.

The benchmark S&P 500 and the blue-chip Dow are trading near two-month highs, having recovered from a selloff in March sparked by the banking crisis as well as fears about the Fed staying on a hawkish course for longer.

The U.S. central bank is widely seen raising rates by a quarter of a percentage point to the 5.00%-5.25% range next month, but recent economic data signaling a slowing U.S. economy is beginning to intensify debate over whether it will be the last in this cycle.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 14, 2023. REUTERS/Brendan McDermid

U.S. central bank officials including New York Fed President John Williams and Cleveland Fed President Loretta Mester are scheduled to speak later this week.

A report at 8:30 a.m. ET (1230 GMT) is expected to show business conditions in New York state improved in April after slumping in the previous month.

At 05:33 a.m. ET, Dow e-minis were up 24 points, or 0.07%, S&P 500 e-minis were up 4.25 points, or 0.10%, and Nasdaq 100 e-minis were up 1 point, or 0.01%.

Prometheus Biosciences Inc rallied 70.2% in premarket trade after Merck & Co said it will buy the biotech company for about $10.8 billion.

Dell Technologies Inc slipped 2.9% as J.P.Morgan downgraded the PC maker's stock to "neutral", while HP Inc gained 2.1% after the brokerage upgraded its stock to "overweight".

U.S.-listed shares of Chinese companies such as Alibaba Group Holding Ltd, JD.com Inc and Baidu Inc rose between 2.5% and 3.3%, tracking an upbeat mood in Shanghai stocks on optimism over China's economic recovery.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)

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