U.S. stock index futures rose sharply Monday as Goldman Sachs kicked off a busy week of earnings on Wall Street with a report that topped expectations.
Those moves come as investors anticipate a slew of major earnings this week. Shares of Goldman Sachs popped 3% in the premarket after the investment bank reported an earnings beat on the top and bottom lines. The firm’s fixed income traders generated about $700 million more revenue than expected.
Bank of America reported quarterly revenue that beat analyst expectations, though the stock was down slightly in the premarket. JPMorgan Chase and Morgan Stanley kicked off the season for big banks last week, posting mixed quarterly results.
“We anticipate volatility to remain elevated as the market toggles between pricing recession risk and soft landing probabilities with each piece of data,” Citi’s Scott Chronert said in a recent note.
IBM will post results after the closing bell.
Other major earnings on the docket this week include Johnson & Johnson, Netflix, Lockheed Martin, Tesla, United Airlines, Union Pacific, Verizon and a host of other companies.
Despite the growing recession fears, S&P 500 companies are expected to post a 4.2% increase in second-quarter profit, according to consensus analyst estimates gathered by FactSet. S&P 500 members are also expected to post a 10.2% increase in revenue for the period, according to FactSet.
Profit expectations for the full year are still high with S&P 500 companies estimated to post a 9.9% earnings increase for 2022, estimates collected by FactSet show.
The major averages are coming off a losing week, despite a Friday relief rally that saw the Dow jump more than 650 points. The 30-stock benchmark shed 0.16% on the week. The S&P 500 and Nasdaq Composite fell 0.93% and 1.57%, respectively.
Friday’s relief rally came as traders bet that the Federal Reserve will be less aggressive than feared at its upcoming meeting. The Wall Street Journal reported Sunday that the central bank is on track to lift interest rates by 75 basis points at its meeting later this month. Goldman Sachs chief economist Jan Hatzius also said in an overnight note that he expected the Fed to raise rates by 0.75 percentage point.
Still, it was the second negative week in the last three for all the major averages. Recession fears have been front and center in recent weeks as market participants worry that aggressive action from the Fed — in an effort to tame decades-high inflation — will ultimately tip the economy into a recession.
“Markets are likely to remain volatile in the coming months and trade based on hopes and fears about economic growth and inflation,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a recent note to clients.
“A more durable improvement in market sentiment is unlikely until there is a consistent decline both in headline and in core inflation readings to reassure investors that the threat of entrenched price rises is passing,” he added.
A batch of economic data drove last week’s wild market action. Inflation jumped 9.1% in June, a hotter-than-expected reading and the largest increase since 1981. That, in turn, led traders to bet that the Fed could raise rates by a full percentage point at its meeting at the end of July.
By the end of the week, however, some of those fears retreated on the back of a strong retail sales number as well as comments from some Fed officials.