U.S. stock futures struggled for direction Tuesday morning after a record-setting session, with investors closely monitoring an early batch of corporate earnings results.
Contracts on the Nasdaq added to the index’s record closing high from Monday, while S&P 500 and Dow futures dipped. PepsiCo (PEP) shares gained 1.6% in early trading after the food and beverage giant delivered a strong earnings beat and raised its outlook for the full year. Meanwhile, JPMorgan Chase (JPM) posted mixed results that sent the stock lower, with weaker-than-expected fixed income sales and trading revenue and managed net interest income overshadowing a better-than-expected overall adjusted revenue and earnings per share.
S&P 500 earnings in aggregate are expected to grow by 64% for the second quarter, which would mark the fastest increase since the fourth quarter of 2009, according to FactSet data. Bank earnings especially were expected to show strength, buoyed by a wave of reopenings during the April through June quarter and an equity market trading at all-time highs. Still, second-quarter results from Goldman Sachs (GS) and JPMorgan Chase showed signs of some moderation after an exceptionally strong first quarter.
The pace of growth for the second half of the year will be closely watched in company guidance, given the potential for a deceleration after an initial reopening surge. And with input costs rising and labor scarcities still weighing on the economy, margins across industries will also be closely in focus.
“If this idea happens and inflation rises, that’s actually a very good thing for your banks,” Courtney Dominguez Payne Capital Management senior wealth advisor, told Yahoo Finance. “So I think that can be a really good way of playing this going forward, where you want to look at companies that are going to benefit from either interest rates rising or who have just some pricing power here, that they are able to raise their costs effectively for their consumers and continue to make that money going forward.”
Investors are also poised to get an update on the inflation front in the Labor Department’s consumer price index (CPI) Tuesday morning. The broadest measure of consumer prices is expected. to rise 0.5% in June versus May, slowing down slightly from May’s 0.6% month-on-month increase. Excluding more volatile food and energy prices, consumer prices likely rose 0.4%, also slowing from May’s 0.7% rise. However, over last year, the bounce off 2020’s pandemic-depressed lows will still be starkly evident, with consumer prices expected to rise 4.0% for the biggest jump in nearly three decades.
7:42 a.m. ET: Goldman Sachs second-quarter results top expectations, fueled by investment banking, wealth management
Goldman Sachs posted results that mirrored those of peer big bank JPMorgan Chase, topping consensus estimates overall on the top and bottom lines, but missing expectations on closely watched trading results.
The bank’s net revenue of $15.39 billion grew 16% over last year and beat estimates for $12.43 billion, according to Bloomberg consensus data. Earnings per share of $15.02 were also well above the $10.15 expected. Net interest income, derived from the bank’s core lending business, grew 73% over last year to $1.63 billion.
Beneath the headline results, however, some business areas performed less strongly. Trading revenue overall was down 32% to $4.9 billion, missing estimates for $5.02 billion. Fixed income trade revenues led the drop, with these plummeting 45% over last year to $2.32 billion. Equity sales and trading revenue also fell over last year by 12% to $2.58 billion, though this topped estimates. Investment banking revenue was a strong spot amid a busy IPO period earlier this year, growing 26% to $3.45 billion. And consumer and wealth management sales were $1.75 billion in the second quarter for a rise of 28% over last year.
“Our second quarter performance and record revenues for the first half of the year demonstrate the strength of our client franchise and our continued progress on our strategic priorities,” CEO David Solomon said in a statement. “While the economic recovery is underway, our clients and communities still face challenges in overcoming the pandemic. But, as always, I am proud of the dedication and resilience of our people, who have worked tirelessly to help our clients navigate the ever-changing market environment.”
7:20 a.m. ET Tuesday: JPMorgan Chase posts mixed second-quarter results
JPMorgan Chase kicked off big bank earnings on a mixed note Tuesday morning, posting overall quarterly sales and profits that topped estimates while key business segments came in slightly short of consensus expectations. Still, CEO Jamie Dimon struck an upbeat tone on the health of consumer spending in the recovering economy, noting, “Consumer and wholesale balance sheets remain exceptionally strong as the economic outlook continues to improve.”
The largest U.S. bank by assets posted earnings per share of $3.78, topping estimates for $3.15, according to Bloomberg consensus data. Likewise, adjusted revenue of $31.4 billion was better than the $30.06 billion anticipated.
The company’s lucrative fixed income sales and trading revenue fell 44% over last year to $4.10 billion, or just a tick below the $4.12 billion anticipated. Equity sales and trading revenue still grew 13% over last year to an estimates-topping $2.69 billion, however, with a market rally to all-time highs during the quarter helping boost results. And in terms of bottom-line results, managed net interest income of $12.85 billion was also down 8% and missed estimates.
6:05 p.m. ET Monday: Stock futures hover near all-time highs
Here’s where markets were trading Monday evening:
S&P 500 futures (ES=F): 4,376.50, unchanged
Dow futures (YM=F): 34,887.00, +12 points (+0.03%)
Nasdaq futures (NQ=F): 14,877.5, +8.25 points (+0.06%)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck