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Dow Futures Recoil Ahead of ‘Brutal’ Earnings Week, North Korea Wildcard

Last Updated September 23, 2020 1:53 PM
Sam Bourgi
Last Updated September 23, 2020 1:53 PM
  • Dow Jones futures traded within a 215-point range Sunday night.
  • Markets are bracing for an ugly earnings week, with the likes of Alphabet, Apple, and Tesla reporting how badly Covid-19 impacted their business.
  • So far, the blended earnings decline for the S&P 500 is far worse than expected.

Futures on the Dow and broader U.S. stock market traded mixed Sunday night, as investors stayed on the sidelines ahead of what’s expected to be an ugly earning week for Wall Street.

Dow, S&P 500, Nasdaq Futures Under Pressure

Futures on all three major U.S. indexes were under pressure Sunday night, reflecting an uneasy mood in global markets. Dow Jones contracts  were off by as much as 123 points before paring losses later in the evening. The contract was last down 35 points, or 0.2%, at 23,623.00.

Dow Jones futures
Stock futures traded mixed-to-lower Sunday night ahead of a potentially volatile week for markets. | Chart: Yahoo Finance 

S&P 500 futures declined 0.2% to 2,823.00. Nasdaq mini futures contracts were relatively flat at 8,772.25.

Corporate Earnings in Focus

The Dow’s three-day winning streak could be in jeopardy on Monday as investors turn their attention to a busy week for corporate earnings.

Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Intel (NASDAQ:INTC), and Tesla (NASDAQ:TSLA) are all scheduled to release their quarterly reports  along with Dow blue-chips Boeing (NYSE: BA) and Exxon Mobil (NYSE:XOM).

Several companies have been forced to slash their quarterly guidance on account of the coronavirus pandemic. Institutions like the International Monetary Fund have warned of a Depression-style collapse for the global economy as governments invoked far-reaching stay-at-home orders to contain the spread of Covid-19.

See why Paul Markham of Newton Investment Management believes Q1 2020 earnings are a write-off:

Investors have already gotten a taste of just how badly coronavirus has impacted corporate earnings. Wall Street’s major banks including Goldman Sachs (NYSE: GS), JPMorgan (NYSE:JPM), and Citigroup (NYSE:C) reported profit declines between 46% and 69% in the first quarter.

As of April 17, S&P 500 companies reported a blended earnings decline of 14.5%–far worse than the 6.8% drop expected, according to FactSet . If the numbers hold, Q1 2020 will mark the worst quarter since FactSet began reporting back in 2009.

North Korea Wildcard

Earnings aren’t the only concern facing investors this week. Conflicting reports about the health of North Korean leader Kim Jong-un could throw markets into a tailspin.

Some investors will no doubt cheer the demise of Kim, but the fall-out could spark a new standoff on the Korean peninsula.

Panic-buying has already gripped the residents of North Korea as even they do not know the fate of their supreme leader. According to the New York Post , store shelves in Pyongyang “were being cleaned out of everything from liquor to laundry detergent” amid conflicting reports on Kim’s health.

Disclaimer: The author holds no investment position in the assets mentioned above.