Futures rise as partial trade deal, tariff delay hopes grow
US stock index futures rose strongly on Friday, as hopes grew for a partial trade deal and a delay in scheduled U.S. tariff increases, as top negotiators from the United States and China geared up to meet for a second day of talks.
Early market action showed Wall Street's three main indexes were headed for their third straight day of gains, after ending the previous session on optimism that the two sides could cool off their row before more U.S. tariffs kick in next week.
President Donald Trump said trade talks between the U.S. and Chinese officials went well, and is set to meet Chinese Vice Premier Liu He later in the day.
Still, the S&P 500 . SPX and Dow Jones Industrial Average .DJI indexes were set for their fourth straight weekly fall, with risk appetite recently taking a hit from weak economic data and headlines about the U.S.-China trade war.
Chipmakers, which are heavily exposed to China, rose steadily in premarket trading. Intel Corp (INTC.O), Nvidia Corp (NVDA.O) and Advanced Micro Devices Inc (AMD.O) all rose about 1.5%, while Apple Inc (AAPL.O) gained 1.3%.
Wedbush hiked its price target for shares of the iPhone maker, as the brokerage remained bullish on the official launch of the company's Apple TV+ video streaming service.
Other gainers included oil majors Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N), which rose 1.1% and 0.6%, respectively as a report of an attack on an Iranian oil tanker lifted oil prices. [O/R] At 7:16 a.m. ET, Dow e-minis 1YMcv1 were up 248 points, or 0.94%. S&P 500 e-minis EScv1 were up 28.5 points, or 0.97% and Nasdaq 100 e-minis NQcv1 were up 88 points, or 1.13%.
Focus will shift to earnings next week as market participants brace for the impact of the trade war on Corporate America. Analysts are expecting a 3.1% drop in earnings for the third quarter from a year ago, based on IBES data from Refinitiv, and that could mark the first decline since 2016. Investors are also betting on a third interest rate cut by the Federal Reserve by the end of the month, to battle an economic downturn in the world's largest economy.
Meanwhile, the biggest U.S. banks are expected to kick off the earnings season on a sour note next week due to falling interest rates, which may have pressured net interest margins enough to cause the sector's first year-over-year earnings per share decline in three years.
While strength in mortgage banking and cheap valuations could provide support to the S&P 500 bank index .SPXBK, its performance depends on what reassurance executives provide on credit conditions, the outlook for loan growth and their ability to reduce deposit costs during their conference calls.
Tuesday brings third quarter profit reports from Citigroup Inc (C.N), Wells Fargo and Co (WFC.N), JPMorgan Chase & Co (JPM.N), and Goldman Sachs (GS.N). Bank of America (BAC.N) reports. The biggest U.S. banks will report a 1.2% decline in third-quarter earnings, while revenue is seen rising 0.9%, according to data aggregated by Refinitiv analyst David Aurelio. This would be the first profit decline since the same quarter in 2016, according to data from Factset.
"Overall it's shaping up to be a pretty challenging quarter because of the net interest rate environment," said Fred Cannon, director of research for Keefe, Bruyette & Woods in New York, citing the flattening and temporary inversion of the U.S. Treasury 2-year/10-year yield curve during the quarter. Bank profits depend heavily on net interest income, or the difference between the rate they charge for long-term loans and the rate they pay for short-term borrowing.