Opening Bell: U.S. Futures Rebound But Investors Question Bank Shares Rally

Key Events

European shares and futures on the S&P 500, Dow and NASDAQ 100 leaped forward this morning, suggesting U.S. indices are poised to wipe out yesterday’s losses and add gains as investors try to gauge the trajectory of the new earnings season.

The STOXX 600 edged higher with retail and chemical stocks, climbing for the fifth consecutive day to reach the highest level since Aug. 9. Technically, the index completed a falling-flag pattern—providing its closing price remains above the pattern.

In the earlier Asian session, local indices reversed yesterday’s regional pattern. China’s Shanghai Composite (+2.39%) and Hong Kong’s Hang Seng (+1.07%)—which completed a falling flag like the pan-European benchmark—outperformed Japan’s Nikkei 225 (+0.24%)—which still managed to hit to the highest since Dec. 3—and South Korea’s KOSPI (+0.26%). The latter index found resistance by yesterday’s shooting star, which reached the highest price since October.

Global Financial Affairs

On Monday, equities in the U.S. ended a three-day advance, after Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) failed to hold onto gains that had been spurred by upbeat earnings results on Friday. While those strong reports had prompted hopeful speculation that this earnings season wouldn't be as bad as previously feared, banks earnings are particularly vulnerable in an environment where the Fed tries to fine-tune a consistent path to monetary policy amid ongoing uncertainty inflation dynamics.

The S&P 500 slipped 0.06%, getting further away from a six-month high, with all sectors but Consumer Staples (+0.59%), Health Care (+0.4%) and Consumer Discretionary (+0.2%) ending in the red. Financials shares (-0.63%) were the obvious fallers, with Citigroup stock dropping as much as 1.71% at the open. While the index managed to pare almost all the losses, short-term traders were stopped out.

The Dow Jones Industrial Average fell 0.1%, dragged down by a vicious sell off of Goldman Sachs (-3.8%) shares, which fared as the worst performer of the index. Muted volumes, highlighted by the languishing advance-decline line, underscored investors' lack of confidence in the latest rally.

The NASDAQ Composite also gave up 0.1%, while the Russell 2000 slid 0.41%.

Yields on 10-year Treasurys rebounded from an initial slump, after data showed China’s holdings of U.S. bonds increased for the third straight month. Technically, the 2.55 levels represent a key support-resistance level since the rebound that developed a symmetrical triangle in January—bearish for yields, as well as for equities, within the yield downtrend since November.

The dollar wavered after finding resistance at the top of a falling flag—bullish after the jump since mid March. Yesterday, and the day before, the USD found support at the pattern’s bottom. The price’s trading range is tightening, which means traders will soon release it from its pattern boundaries like a spring, as it is expected to breakout, with an upward bias.

WTI rebounded from an early slide over concerns of building U.S. stockpiles. Some analysts are looking at shale's "drilled but uncompleted" wells as a time bomb waiting to go off on OPEC supply cuts.Technically, the setback is generating a falling flag, bullish in the uptrend.

Up Ahead

• China GDP, industrial production and retail sales data is coming up on Wednesday.
• Stock markets in countries including the U.S., U.K. and Germany will be closed for Easter holidays on Friday.

Earnings

• Bank of America (NYSE:BAC) and BlackRock (NYSE:BLK) are due to report on Tuesday. The former group, which hasn't missed an EPS target in 11 quarters, is expected to post a $0.66 EPS on a $23.2 billion revenue, while the latter, which missed both EPS and revenues in the previous quarter, is poised to unveil a $6.12 EPS and a $3.33 billon revenue.
• Johnson & Johnson (NYSE:JNJ) also reports today before market open. Consensus calls for a $2.04 EPS while earnings expect a $19.62 billion revenue. The company hadn’t missed on EPS for at least 23 quarters, or on revenue for 7 quarters.
• United Continental (NASDAQ:UAL) is expected to report earnings after market close, with a $0.94 EPS and $9.61 billion revenue. The company missed EPS estimates only one single quarter in three years, beating forecasts for the remainder of that timeframe.
• Netflix (NASDAQ:NFLX), scheduled to report results after market close, with an EPS of $0.57 and revenue of $4.5 billion, hasn’t missed EPS for five quarters, but it did miss on earnings last quarter. The stock of the online media giant, whose upward trajectory recently stalled, will be put to the test as the company faces new video-streaming competition by the likes of Disney and Apple (NASDAQ:AAPL).
• IBM (NYSE:IBM) is slated to release its corporate results after market close and is expected to post an EPS of $2.22 and revenue of $18.52 billion. The company beat EPS estimates for the previous 14 quarters and revenue for the past two. Earnings results from the multinational IT group will be watched closed by investors for signs that the company's publicized turn-around is gaining momentum.
• Wednesday it's the turn of Morgan Stanley (NYSE:MS), American Express (NYSE:AXP), Alcoa (NYSE:AA) and Taiwan Semiconductor Manufacturing(NYSE:TSM) (NYSE:TSM).
• Honeywell (NYSE:HON) is due to publish its earnings report on Thursday.

Market Moves

Stocks

• The U.K.’s FTSE 100 rose less than 0.05% to the highest in more than a week.
• Germany’s DAX gained 0.2%, reaching the highest in more than six months on its fifth consecutive advance.
• The MSCI Emerging Market Index climbed 0.4%, the largest advance in a week.
• The MSCI Asia Pacific Index gained 0.3% to the highest in more than six months.

Currencies

• The Dollar Index increased 0.1%.
• The euro rose 0.1% to $1.131, the strongest in more than three weeks.
• The British pound dropped 0.1% to $1.3091.
• The Japanese yen rose 0.1% to 111.89 per dollar, the biggest advance in a week.

Bonds

• The yield on 10-year Treasurys fell less than one basis point to 2.55%.
• Germany’s 10-year yield rose less than one basis point to 0.06%, the highest in almost four weeks.
• Britain’s 10-year yield slid less than one basis point to 1.216%.
• Italy’s 10-year yield declined two basis points to 2.557%.

Commodities

• Gold dropped 0.1% to $1,286.32 an ounce, the weakest in almost six weeks.