Stock futures roughly flat as investors brace for earnings

Stock futures were little changed Monday evening as investors braced for what is expected to be an ugly earnings season, as the coronavirus pandemic swept the country at the end of the first quarter.

During the regular session Monday, the S&P 500 and Dow ended lower and gave back some of last week’s steep advance. The Nasdaq ended slightly higher, buoyed by a 6% jump in shares of Amazon after the company announced another wave of hiring to keep up with a surge in delivery demand.

Federal and state officials have shifted their rhetoric around the coronavirus from solely discussing containment and distancing efforts to beginning to think about reopening portions of the country.

During a press conference Monday, Andrew Cuomo, governor of the hardest-hit state of New York, said he believed “the worst is over” so long as New Yorkers remain prudent about abiding by social distancing measures. He delivered a joint conference with the governors of New Jersey, Connecticut, Pennsylvania, Delaware and Rhode Island to announce that they had formed a working group to devise a reopening plan for the Northeast.

In a similar move on the other side of the country, California Governor Gavin Newsom said he was working with Washington state and Oregon to come up with a blueprint to reopen schools and businesses, as new cases of the coronavirus in the regions also began showing signs of leveling off.

The announcements of these multi-state coalitions came shortly after President Donald Trump said on Twitter that the decision to reopen the government would be determined by the White House, creating a potential sticking point in deciding the ultimate path to easing weeks-long social distancing measures across the nation.

A first batch of corporate earnings results set for release Tuesday will provide investors with the first data on how the coronavirus pandemic has impacted big banks and health-care institutions. JPMorgan Chase (JPM) and Wells Fargo (WFC) are some of the biggest names to report first-quarter results Monday, followed by other major financial institutions later in the week. Health-care giant Johnson & Johnson (JNJ) will also report results Tuesday morning.

With the pandemic leading to unprecedented social distancing and lockdown measures globally – along with equally unprecedented fiscal and monetary policy responses – analysts have had little to grasp onto to estimate how companies fared in the early stages of the outbreak.

“Concerned investors have focused on the fact that the 1Q earnings season will inevitably lead to a wave of downward revisions to analyst estimates, meaning the implied equity risk premium will fall — and the consensus P/E [price-to-earnings] multiple will rise — even with no change in the S&P 500 price,” Goldman Sachs analyst David Kostin wrote in a note Monday. His firm forecasts a drop in S&P 500 earnings per share of 15% for the quarter over last year.

“While many analysts were hamstrung by uncertainty and the lack of management guidance for much of the last several weeks, revisions have been accelerating ahead of earnings reports,” he added. Nonetheless, we believe they remain too high.”

6:00 p.m. ET Monday: Stock futures open roughly flat

Here were the main moves at the start of the overnight session for U.S. equity futures, as of 6:00 p.m. ET Monday:

  • S&P 500 futures (ES=F): up 2.25 points, or 0.08% to 2,761.5

  • Dow futures (YM=F): up 21 points, or 0.09% to 23,330

  • Nasdaq futures (NQ=F): up 11.25 points, or 0.14% to 8,338.5

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