Futures flat as big banks fall after earnings; inflation data awaited

[July 12, 2024]  By Medha Singh and Ankika Biswas

(Reuters) -U.S. index futures struggled for direction on Friday as investors parsed a set of big bank earnings to gauge the health of corporate America, while awaiting key inflation data for clues on the timing of interest rate cuts.

JPMorgan Chase's second-quarter profit rose on a boost from rising investment banking fees and an $8 billion accounting gain from a share exchange deal with Visa. However, shares of the world's largest bank were last down 1.1% in volatile premarket trading.

Wells Fargo dropped 5.1% after second-quarter profit declined as the lender shelled out more to hold on to deposits, amid intense competition for customers' money.

The results come against the backdrop of expectations of some of the largest U.S. banks witnessing weaker second-quarter profits due to lower interest payments and higher provisions to cover deteriorating loans.

Citigroup was also down 0.4% ahead of its results before the opening bell.

As the S&P 500 and Nasdaq scale new peaks, investors are hoping for strong profit growth from companies beyond the heavyweight tech names such as Nvidia, so that the U.S. stocks rally can broaden out.

A rotation out of high-flying large-cap stocks in favor of small-cap shares knocked down the tech-laden Nasdaq by nearly 2% on Thursday after a surprise fall in U.S. consumer prices solidified bets of a September interest rate cut.

"This CPI report came one day after Federal Reserve Chairman Powell concluded the double testimony in Congress, where he kept the cards close to his chest and decided to please Fed members with both hawkish and dovish comments," Achilleas Georgolopoulos, investment analyst at forex broker XM said in a note.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., July 3, 2024. REUTERS/Brendan McDermid/File Photo

"However, with the clock now counting down to the month-end gathering, the doves will probably push for a dovish stance on July 31."

Investors will watch for the Producer Price Index report, due at 8:30 a.m. ET, for further evidence of moderating price pressures.

The PPI reading for June is expected to rise 2.3% annually, compared to a 2.2% rise in May. Excluding volatile food and energy components, the so-called core figure likely advanced 2.5% following May's 2.3% rise.

Traders now see a 92% chance of a rate cut in September, up from 77.7% a week ago, according to CME Group's FedWatch Tool.

Among other data points, the University of Michigan's consumer survey is also due after markets open.

At 6:54 a.m. ET, Dow e-minis were up 17 points, or 0.04%, S&P 500 e-minis were up 1.75 points, or 0.03%, and Nasdaq 100 e-minis were down 13.25 points, or 0.06%.

Tesla dropped 2% after UBS downgraded the EV maker's stock to "sell" from "neutral".

BNY climbed 2.3% after the U.S. bank posted a 10% rise in second-quarter net profit on Friday.

AT&T dropped 2.7% after the telecom firm said data from about 109 million customer accounts containing records of calls and texts from 2022 was illegally downloaded in April.

(Reporting by Medha Singh and Ankika Biswas in Bengaluru; Editing by Saumyadeb Chakrabarty and Pooja Desai)

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