Dow Futures Begin to Unravel Over Fears of Longest Earnings Recession in 3 Years

Sam Bourgi @hsbourgi
October 16, 2019 04:14 UTC

Futures on the Dow Jones Industrial Average (DJIA) declined on Wednesday, giving back some of their early-week gains as investors braced for corporate America’s longest earnings recession in years.

Dow Futures Fall; S&P 500, Nasdaq Futures Follow

Futures contracts on all three major U.S. indexes edged lower through the Asian session, setting the stage for a weak start to New York trading at 9:30 a.m. ET. Dow Jones futures declined 81 points, or 0.3%, to trade at 26,921.00.

The overnight futures market is pointing to a dismal start to New York trading Wednesday. | Chart: bloomberg.com

The December contract for the S&P 500 Index declined 0.3% to 2,990.00.Nasdaq 100 mini futures contracts tumbled 0.2% to 7,940.75.

U.S. equities traded sharply higher on Tuesday as optimism surrounding U.S.-China trade talks continued to reverberate. The Dow was up more than 300 points earlier in the day before closing on a gain of 237 points.

Earnings Recession Likely for U.S. Companies

Corporate earnings surprised to the upside on Tuesday, with J.P. Morgan Chase (NYSE:JPM), Citigroup (NYSE:C) and UnitedHealth Group (NYSE:UNH) posting better than expected top and bottom-line results. These blue-chip companies masked what many analysts believe will be another disappointing quarter for U.S. companies.

The S&P 500 is expected to report an earnings decline of 4.6% in the third quarter, according to FactSet, a financial research firm. If the forecast holds, it would mark the third consecutive quarter of year-over-year declines – the longest stretch since 2015-16.

Earnings have been revised sharply lower since the end of the second quarter, when FactSet called for an earnings slump of only 0.6%. Unlike in June, FactSet now expects all 11 S&P 500 companies to report earnings declines.

U.S. companies are not only feeling the pinch of a protracted trade war, they have reported negative impacts from foreign exchange rates. According to FactSet, of the 22 S&P 500 companies to have reported earnings through Oct. 10, half cited foreign exchange rates “as a factor that either had a negative impact on earnings or revenues in Q3 or is expected to have a negative impact” in the future.

This article was edited by Josiah Wilmoth.

Last modified: October 16, 2019 04:16 UTC

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Sam Bourgi @hsbourgi

Financial Editor to CCN Markets, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi. Sam is based in Ontario, Canada and can be contacted at sam.bourgi@ccn.com