Stock futures pointed to a slightly higher open Monday morning as investors expected a flood of earnings reports this week from Big Tech companies, as well as a bevy of smaller corporations across industries.
The Dow Jones Industrial Average was projected to open higher, building on last week's gains after the 30-stock index closed at an all-time high on Friday. After setting a new intraday high last week, the S&P 500 is likewise set to open higher. Futures on the Nasdaq also rose.
Crude oil prices in the United States' West Texas Intermediate (CL=F) region surged to close to $85 a barrel Monday morning, the highest level since 2014. The move was mirrored by gains in Brent crude (BZ=F), the international benchmark, which climbed above $86 per barrel for the first time since 2018 after Saudi Arabia's energy minister said in a Bloomberg interview that oil producers should be cautious about increasing output despite rising prices.
As investors fretted about rising energy and commodity prices, as well as other price increases across the rebuilding economy, the benchmark 10-year Treasury yield stayed above 1.66 percent, its highest level since May. During the week, Federal Reserve Chair Jerome Powell stated that supply chain restrictions were causing higher inflationary pressures that were "likely to last longer than originally forecast, potentially well into next year."
Over the last few weeks, a number of individual corporations have mentioned the effects of growing expenses in their earnings releases. CSX Transportation (CSX) senior vice president of sales and marketing Kevin Boone stated during the company's earnings call last week that cost inflation has grown over the last year, and "expectations have risen and are rising in the next year." Similarly, Whirlpool (WHRL) CEO Marc Bitzer stated on the company's results call that he does not "anticipate inflation to swiftly come off" in the coming year.
The focus of this week's earnings reports will be on the Big Tech companies, such as Facebook (FB), Apple (AAPL), Amazon (AMZN), and Alphabet (GOOGL). These are some of the S&P 500's most highly weighted components. After large gains in 2020 during the height of stay-in-place orders and desire for technology to keep connected, most have lagged the market this year.
Despite persistent supply-side issues, investors are eager to see these companies repeat the performance of some other earlier reporters and achieve estimates-topping results. These concerns for technology businesses are expected to revolve around the impact of global chip shortages, as well as the impact of growing labor prices, given their large workforces.
"We continue to strongly believe that 3Q tech earnings will be standouts this week, helping drive the sector higher into year-end as the Street continues to underestimate the fundamentals of this multi-trillion digital transformation playing out among consumer and enterprise tech names," Wedbush analyst Dan Ives wrote in a note on Sunday, despite the lingering black cloud chip shortage.
Nonetheless, according to data from Deutsche Bank, this week will be a busy one for earnings season, with around 165 businesses in the S&P 500 reporting results.
According to data from FactSet, about 23% of S&P 500 companies had reported actual third-quarter results as of Friday, with 84 percent exceeding Wall Street's earnings per share (EPS) expectations. Based on actual results and forecasts for firms that have yet to report as of last week, the S&P 500's anticipated earnings growth rate was 32.7 percent. If this trend continues until the end of the third quarter results season, it will be the index's third-highest profits growth rate since 2010.