Wall Street set to open mixed amid Delta variant jitters

Concerns about the Delta variant of COVID-19 are making global markets uneasy, and that includes the US, where stocks are set to give back some of Friday’s gains.

The Dow Jones Industrial Average is expected to open 153 points lower at 34,717 and the S&P 500 is tipped to shed 12 points at 4,358. The tech-laced Nasdaq 100 is seen defying the trend, however, with a 24 point advance to 14,850.

“The major US banks will report their quarterly earnings results in the coming week,” observed Fawad Razaqzada at ThinkMarkets.

“After a very positive first quarter, lenders may very well struggle to top those numbers in Q2. Indeed, Wall Street analysts on average expect EPS and revenue to decline from levels seen in the first quarter. Still, with the Covid-19 vaccinations having been ramped up and the economy recovering stronger than expected, don’t expect to see many disappointments either. In fact, it is quite possible that with lowered expectations, banks might be able to beat consensus, though probably not like Q1 style.

“One source of surprise in Q1 was the release of large reserves that some lenders had previously stowed away for loan losses that didn’t materialise. Expect the banks to release more such funds as the impact of the pandemic was largely offset by significant intervention from the government and the Federal Reserve. The quieter market conditions in Q2 means profits from trading operations will most likely be lower than in Q1 for US banks,” he added.

Neil Wilson at markets.com reckons investors will be looking at share buybacks and dividends after the Fed gave all 23 major institutions the green light to up shareholder returns again.

“Trading revenues won’t be as strong as we have been used to, but loan loss provisions should continue to be written down, boosting headline EPS. Very strong numbers are expected, so banks have a lot of work to do and will require a major upside surprise this earnings season,” Wilson said.

US macro data is not so much thin on the ground as non-existent, which gives traders more time to work themselves up into a tizzy over tomorrow’s consumer price index data.

On the company front, Kaltura has slashed the indicated range for the price on its initial public offering. The company is expected to float at between US$9 and US$11, having previously hoped to price its shares at between US$14 and US$16. The new flotation price would value the video-on-demand specialist at up to US$1.36bn.

Four things to watch for on Monday:

• The earnings diary is a little light today, although there are results expected from modelling software group Simulations Plus Inc (NASDAQ:SLP), Norwegian investment firm Ocean Yield ASA (OTCMKTS:OYIEF) and consumer electronics company VOXX International Corp (NASDAQ:VOXX)
• Shares in Virgin Galactic Holdings Inc (NYSE:SPCE) will be in focus after its VSS Unity spacecraft completed its first test flight with a full crew in the cabin, reaching an altitude of 53.5 miles just outside the Earth’s atmosphere
• Electric car maker Tesla Inc (NASDAQ:TSLA) may also draw attention amid reports the company is facing a fine in Germany for unauthorised tank building at its car factory under construction near Berlin
• On the macro front, the calendar is thin, however, some traders may be interested in US consumer inflation expectations for June

Story by ProactiveInvestors