US pre-open: Stocks seen lower as investors eye Q1 earnings season
US stock futures pointed to a slightly lower open on Wall Street on Monday as jitters crept in ahead of the start of first-quarter earnings season later this week.
At 1225 BST, Dow Jones Industrial Average futures were down 0.3%, while S&P 500 and Nasdaq futures were 0.1% weaker.
James Hughes, chief market analyst at Axi Trader, said: "The Dow may have closed at close to six-month highs on Friday night, but with a potentially disappointing Q1 earnings season kicking off mid-week, the air of confidence does seem to be running a little thin. That sits at odds with Friday’s economic data, where the slightly better than expected non-farm payrolls print gave little cause for concern whilst lacklustre wage growth added to the idea that the Federal Reserve may yet be pushed into a more dovish position over interest rate policy, which in turn should be good for stocks."
Morgan Stanley strategists said that while they underestimated the impact of the Federal Reserve's pivot on equity prices, the earnings recession is "just the beginning". They warned that Q119 could be the first quarter of negative year-on-year growth in three years.
"With US stocks fully valued and the Fed maximum dovish at this point, we think there will need to be some evidence of a real turn in earnings growth for US stocks to advance much further. 1Q earnings season offers a gut check for a market looking for some evidence that the worst is truly behind us.
"We suspect this year's big rally in stocks has had a positive impact on corporate confidence. This could encourage them to maintain full-year guidance, which embeds a big second-half recovery in earnings growth. The question is whether the market will like that or instead prefer a lowered bar that is more achievable. We think it's a tough call but lean toward the latter."
With the focus mostly on upcoming earnings, signs of progress in Sino-US trade relations were set to take a back seat, as Larry Kudlow said the two sides were getting closer to a deal and that top tier officials will meet for talks again this week.
In oil markets, Brent crude hit its highest level this year, breaching the $70 a barrel mark as tensions in Libya escalated, increasing the risk of supply disruptions. "The turmoil in the oil-rich North African country is adding to the already tightening oil market where supplies are curtailed because of OPEC production cuts and US sanctions on Iran and Venezuela," said City Index analyst Fiona Cincotta.
In corporate news, Boeing shares could be active after the company said on Friday that it would cut its production of the 737 MAX 8 aircraft.
On the macroeconomic front, factory orders for February are at 1400 BST.