Stock futures build gains, Treasury yields rise, with earnings in focus; Netflix nudges higher as investors eye paid sharing effect on profits; Goldman Sachs gains as bank earnings re-take center stage on Wall Street; Johnson & Johnson earnings on deck with Kenvue IPO, talc bankruptcy in focus and Nvidia shares jump after HSBC upgrade on ai chip prospects.
Five things you need to know before the market opens on Tuesday April 18:
1. — Stock Futures Build Gains, Treasury Yields Rise, With Earnings In Focus
U.S. equity futures bumped higher Tuesday, following on from the second highest close of the year for the S&P 500, as investors looked to improving global growth prospects and a busy slate of corporate earnings.
Stocks have been moving firmly though notable surge in Treasury bond yields, as well, with benchmark 2-year notes rising to 4.2% in overnight trading following yesterday’s stronger-than-expected reading for manufacturing activity in the New York region and a modest tick higher in the National Association of Home Builder’s closely-tracked housing market index. Benchmark 10-year notes, meanwhile, touched 3.6% in overnight dealing.
A solid reading overnight for China’s first quarter GDP, which expanded at a 4.5% pace over the three months ending in March, added to the broader market optimism, although softer readings for industrial output over the final month of the quarter tamed some of the overall data impact.
Markets are likely to key on this morning’s run of U.S. corporate earnings for near-term direction, with updates from Goldman Sachs, Bank of America and Johnson & Johnson expected before the start of trading.
Around 62 S&P 500 companies are set to report first quarter profits this week, including Tesla (TSLA) – Get Free Report on Wednesday and AT&T (T) – Get Free Report on Thursday, with collective earnings forecast to fall 4.8% from last year to a share-weighted $420.7 billion
Elsewhere, the U.S. dollar index was marked 0.45% lower against a baskets of its global peers at 101.641 in overnight trading, while the CME Group’s FedWatch now suggests an 89.1% chance of a 25 basis point Fed rate hike next month in Washington, which would take the Fed Funds rate to between 5% and 5.25%.
Heading into the start of trading on Wall Street, futures contracts tied to the S&P 500 are priced for a 15 point opening bell gain while those linked to the Dow Jones Industrial Average are indicating a 60 point move to the upside. The tech-focused Nasdaq is priced for a 100 point advance.
Overnight in Europe, the region-wide Stoxx 600 was marked 0.25% higher in early Frankfurt trading, with London’s FTSE 100 rising 0.30%
Overnight in Asia, the MSCI ex-Japan index was marked 0.32% lower into the close of trading while the Nikkei 225 extended its winning streak to an eighth consecutive session with a 0.51% advance in Tokyo.
2. — Netflix Nudges Higher As Investors Eye Paid Sharing Effect On Profits
Analysts expect Netflix to post March quarter profits of $2.86 per share on revenues of $8.175 billion. Netflix said earlier this year that it will no longer provide specific guidance on new subscribers adding only that it sees a “modest” increase in new additions and forecast earnings in the region of $2.82 per share and revenues of $8.17 billion.
The likely focus of the report, however, will be any commentary or data Netflix provides to indicate that its recently-adopted strategy of paid sharing — which allows users to share a single password for an extra monthly fee — is adding to incremental revenue gains or increasing customer churn.
And, with overall viewership figures down when compared to last year, Netflix will also have to lean on its newly-launched ad service, priced at less than half the cost of its basic streaming offering to offset subscriber losses.
This quarter’s earnings will also be the first without co-founder Reed Hastings at the helm following his decision to transition to the role of executive chairman late last year. Hasting’s co-CEO, Ted Sarandos, will remain in place, but will relinquish his role as chief content office — replaced by Bela Bajaria — and will be joined by current COO Greg Peters.
Netflix shares were marked 0.48% higher in pre-market trading to indicate an opening bell price of $3434.33 each.
3. — Goldman Sachs Gains As Bank Earnings Re-Take Center Stage On Wall Street
Goldman Sachs (GS) – Get Free Report shares moved higher in pre-market trading as investors looks to the group to carry momentum from last week’s stronger-than-expected bank earnings into the start of the Tuesday session.
Goldman Sachs is expected to post a bottom line of $8.10 per share, a 24.7% slump compared to last year, on relatively flat revenues of around $12.8 billion for the three months ending in March.
A dearth of global dealmaking and new IPOs is likely to hammer investment banking profits, but, like Citigroup (C) – Get Free Report and JPMorgan (JPM) – Get Free Report, Goldman is expected to get a big boost from the ongoing rise in U.S. interest rates that will power overall gains in net interest income.
Investors will also track the amount of cash Goldman opts to set aside to cover potential bad loans — as well as its $5 million deposit at First Republic — following last month’s collapse of Silicon Valley Bank. Goldman’s fourth quarter reserves were pegged at $972 million.
Goldman Sachs shares were marked 1% higher in pre-market trading to indicate an opening bell price of $343.00 each.
4. — Johnson & Johnson Earnings On Deck With Kenvue IPO, Talc Bankruptcy In Focus
Analysts expect Johnson and Johnson to post an adjusted bottom line of $2.51 per share, a 6% decline from last year, on revenues of $23.67 billion. Investors will look for progress in the group’s plans to list its consumer healthcare division — with brands such as as Band-Aid, Baby Powder, Listerine, Neutrogena and Tylenon — as a stand-alone company, known as Kenvue, on the New York Stock Exchange.
The group is also likely to address its recent move to re-submit a bankruptcy proposal to re-submit a bankruptcy petition on behalf of subsidiary that would payout billions in claims linked to allegations that its talc products caused users cancer.
Johnson & Johnson said the division, known as LTL Management, had re-submitted plans to the bankruptcy court in New Jersey that would see it pay $8.9 billion, spread out over 25 years, to settle the myriad claims, even though the company considers them “specious and lacking scientific merit.”
Johnson & Johnson shares were marked 0.2% higher in pre-market trading to indicate an opening bell price of $166.00 each.
5. — Nvidia Shares Jump After HSBC Upgrade On AI Chip Prospects
Analyst Frank Lee lifted his rating on Nvidia to ‘buy’ from ‘reduce’, while adding some $180 to his previous price target, with a new benchmark of $355 per share, citing the chipmaker’s opportunities in the AI space.
Earlier this year, Nvidia unveiled a new AI “supercomputer”, known as Nvidia DGX, that can allow business customers to access AI-related technology through cloud computing providers such as Microsoft (MSFT) – Get Free Report and Oracle (ORCL) – Get Free Report, essentially creating a new market for “AI-as-a-service” to thousands of companies around the world.
That ability to address the new AI investment explosion, sparked in part by the unveiling of the ChatGPT chatbot earlier this year, could put Nvidia in a leadership position within a market that could be worth more than $600 billion, according to CEO Jensen Huang.
Nvidia shares were marked 1.75% higher in pre-market trading to indicate an opening bell price of $274.73 each.