The first round of corporate earnings reports scheduled for Tuesday morning and long-expected events from Amazon and Apple prompted modest gains for stock futures during overnight trading on Monday.
During regular trading earlier that day, Apple stocks ballooned 6% ahead of Tuesday’s latest iPhone release. Shares continued to climb in the evening. The iPhone 12 is predicted to contain several new innovations, including 5G connectivity capabilities, OLED screens, and LIDAR sensors, supporting augmented reality features for select models.
In the meantime, e-commerce giant Amazon also enjoyed slight gains during Monday’s overnight session, with the company reporting a 4.8% per-share increase at closing. While investors anticipate Prime Day, which begins on Tuesday, a projection by research company eMarketer predicts that Amazon will generate an estimated $10 billion off the two-day event.
Apple and Amazon’s Monday gains played a significant role in the rest of the Wall Street rally, with the S&P 500 ending the session at a six-week peak. Meanwhile, the Nasdaq easily topped both the S&P 500 and Dow after its 2.5%-plus advance.
Besides these highly-anticipated corporate events, investors are also awaiting a string of quarterly results. JPMorgan Chase and Citigroup are among the names scheduled to issue their third-quarter reports Tuesday morning. The results will offer market participants an initial assessment at how big banks have faired amid the Federal Reserve’s near-zero interest rates and their reserves in expectation of consumer loan defaults over the last several months.
Big banks’ third quarter reserves might not reflect the billions saved throughout the second quarter as they braced for a slew of defaulted loans since the pandemic’s onset. However, market participants continue preparing for possible provision for credit loss to drag down banks’ last quarter gains.
Overall, consensus economists forecast the S&P 500’s financials will experience a combined earnings per share contraction as much as 19.4% year-over-year. Even so, this outlook, as well as the general prediction for a 20.5% backslide in the S&P 500’s third-quarter revenue, has been revised since the beginning of summer, with economists considering more optimistic economic prospects since activity plummeted in spring.
In a Monday memo, Jeffrey Buchbinder and Ryan Detrick, LPL Research analysts, wrote, “The increase in analysts’ earnings estimates reflects increased confidence in the outlook, even with the challenges Covid-19 still presents in terms of social distancing, various safety protocols, and shifting consumer behavior.”
“We have been encouraged by recent data pointing to a continued steady reopening of the economy, and we believe the likelihood that additional lockdowns may meaningfully impair business activity remains very low,” they added.
“We believe the chances are good that the technology sector and the digital media and e-commerce internet industry groups will produce earnings growth in the third quarter,” they continued. “As long as those winners keep winning, and we think they will, they provide a solid earnings foundation for the broad market.”
In addition to JPMorgan Chase and Citigroup, Delta Airlines and Johnson & Johnson will issue quarterly reports before the opening bell Tuesday morning.
- McCormick, Emily. “Stock Market News Live Updates: Stock Futures Open Higher Ahead of Apple and Amazon Events, Earnings.” Yahoo! Finance, Yahoo!, 13 Oct. 2020, finance.yahoo.com/news/stock-market-news-live-october-13-2020-221850335.html.