4:10pm: Big banks among bevy of companies reporting this week
The Dow closed Monday up 101 points, 0.3%, at 33,987, the Nasdaq Composite added 34 points, 0.3%, to 12,158 and the S&P 500 improved 14 points, 0.3%, to 4,151. The small-cap Russell 2000 index gained 18 points, 1%, to 1,799.
The indexes pulled into positive territory in the afternoon, as investors look forward to a busy earnings week. Companies due to report this week include Bank of America, Goldman Sachs, Morgan Stanley, Tesla, IBM and Netflix.
Data from Bank of America suggests that earnings season is going well thus far. Of the companies that reported during the first week, 90% beat EPS estimates, the highest such rate since 2012.
2:00pm: Roivant pops
Prometheus wasn't the only beneficiary of the big Merck takeover deal -- US pharmaceutical company Roivant shares were up nearly 20% on Monday afternoon.
Roivant is working on a rival bowl disease treatment, RVT-3101, to Prometheus, whose monoclonal antibody treatment PRA023 being developed for ulcerative colitis (UC) was a cornerstone of the Merck deal.
Given the potential of both PRA023 and RVT-3101 for UC, investors are set to take a keen interest in Merck and Roivant as they progress their respective candidates through Phase 3 trials.
Roivant shares had added 19% at US$8.47. Prometheus had added almost 70% at US$192.88 while Merck had edged 0.7% lower at US$114.53.
Meanwhile, the S&P 500 was down 0.3%, the Dow down 0.2% and the Nasdaq down 0.4% by midafternoon.
12.05pm: Cautious trading ahead of key earnings this week
US stocks were lower in noon trading as investors were cautious with some key corporate earnings set to roll out this week.
At midday, the Dow lost 6 points to 33,881, while the S&P 500 eased 8 points at 4,129 and the tech-heavy Nasdaq slipped 45 points to 12,079.
“There is a tug of war between those who are feeling optimistic that the Fed will soon be ending the rate tightening program because of softness that we’re seeing in the economy ... with those who believe the Fed will be forced to raise rates longer because the economy is not in a sense, surrendering,” CFRA Research chief investment strategist Sam Stovall said.
Notable movers included shares of Alphabet Inc, which slipped nearly 4% following media reports that Samsung Electronics was considering replacing Google with Microsoft-owned Bing as the default search engine on its devices.
10:50am: More bank earnings roll in
Charles Schwab, State Street and M&T Bank were the latest to report earnings.
Charles Schwab reported a strong rise in first-quarter revenue and earnings as it continued to attract new client investment inflows and benefitted from a rising interest-rate environment.
State Street's first quarter results failed to meet expectations on both profit and revenue.
M&T Bank benefitted from the spate of rate hikes of the past year, which supported a doubling in the interest it earns on outstanding loans.
All three major indices were in the red by midmorning trading.
9:35am: All eyes on earnings
US stocks started the day mixed ahead of a slew of earnings from big names this week by the likes of Bank of America, Goldman Sachs, Morgan Stanley, Johnson & Johnson, Procter & Gamble, Netflix, and Tesla.
Shortly after the opening bell, the Nasdaq had fallen 19 points or 0.2% at 12,104 points, the S&P 500 was down 3 points or 0.1% at 4,135 points, while the Dow Jones was flat at 33,891 points.
FOREX.com market analyst Fiona Cincotta noted trade was subdued on Monday morning as investors waited for earnings, specifically bank results with regional institutions under the spotlight this week.
“Broadly speaking, the bar is low for earnings season, with a 4.8% decline in 1Q earnings expected,” she said. “Some sectors such as energy, are likely to perform better than most.”
Cincotta noted that, in addition to earnings, investors continue to weigh up the Fed’s next move with officials including New York Fed President John Williams and Cleveland Fed President Loretta Mester due to speak later this week.
“Federal Reserve Governor Christopher Waller said that the Fed will need to hike rates again to tame inflation, which is still far too high,” she said. “The market is currently pricing in an 83% possibility of a 25 basis point hike in May, up from 72% a week ago.”
8:30am: Rush of M&A to start the week
Two big deals in the pharmaceutical and entertainment sectors are kicking off the week.
Merck is set to acquire Prometheus Biosciences for $10.8bn in an all-cash deal, as the US drugmaker aims to bolster its pipeline.
San Diego-based Prometheus focuses on diseases caused by abnormal immune system activity and is working on a monoclonal antibody treatment for ulcerative colitis, an inflammatory bowel disease. The acquisition will bolster Merck's position in the rapidly growing immunology field.
Elsewhere, Sega, the creator of Sonic-the-hedgehog, has tendered a £625mln offer for Rovio Entertainment, owner of the Angry Birds franchise.
The deal will see all outstanding shares in Rovio bought for €9.25 each, more than a 50% upside to the €6 price at the start of 2023.
6:30am: Quarterly excitement
Wall Street is likely to open mixed on Monday as earnings season gains momentum in a week that will see companies including Bank of America, Goldman Sachs, Johnson & Johnson, Netflix and Tesla, among other large blue chips, report quarterly results.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.1% pre-market trading and those for the broader S&P 500 index also gained 0.1%, while contracts for the Nasdaq-100 slipped back 0.1%.
Despite a positive start to earnings season on Friday as banking giants JPMorgan, Citigroup, and Wells Fargo reported strong first-quarter results, all three major US indices closed in the red as expectations for further interest rate hikes increased. The DJIA fell 0.4% to 33,886, while the S&P 500 finished 0.2% lower at 4,138, and the Nasdaq closed 0.4% down at 12,123.
“A robust early showing from US banks could not prevent a market slip as economic data pointed to the near certainty of another Federal Reserve interest rate hike in May,” commented Richard Hunter, head of markets at interactive investor. “The initial relief was palpable as reports from several banks suggested that the recent banking turmoil was not systemic and rather more applicable to smaller, regional banks.”
Comments from JPMorgan on Friday that consumers were still spending and that businesses remained in good shape were “somewhat undone” by March’s retail sales report which showed a decline of 1% in March, as compared to an expected dip of 0.5%, Hunter said.
“While some of the fall was attributed to the lower cost of fuel, nerves remain on edge towards the consumer, which is a major driver of economic growth in the US, and any softness in further releases could presage a recession to come,” he added. ”Meanwhile, an indicator of consumer sentiment saw a slight increase in inflation expectations. Taken together, the economic picture pointed to an almost certain outcome, namely that the Fed will likely pursue its hiking policy with at least one more rise of 0.25% in May.”
Ahead of results from Bank of America and Netflix tomorrow, Charles Schwab and State Street Corp report first-quarter numbers today.