(Reuters) – U.S. stock index futures rose on Tuesday as a better-than-expected profit from JPMorgan lifted the mood in the first batch of quarterly reports from big banks bracing for a wave of coronavirus-driven loan defaults.
The largest U.S. lender rose about 2% in premarket trading as it posted a smaller-than-expected 51% drop in second-quarter profit and set aside $10.5 billion to cover potential bad loans.
“The numbers were better than what people were afraid of. They’re making money in a difficult environment and it shows what good management and a strong balance sheet can do,” said Christopher Grisanti, chief equity strategist at MAI Capital Management in Cleveland, Ohio.
Citigroup Inc rose 1.6% despite reporting a plunge in quarterly profit and setting aside billions for potential loan defaults. Wells Fargo & Co, on the other hand, fell 3% after it reported a quarterly net loss.
Goldman Sachs Group Inc, Morgan Stanley and Bank of America Corp which report later this week rose between 1.4% and 2.6%.
Investors are bracing for what could be the sharpest drop in quarterly earnings for S&P 500 firms since the 2008 financial crisis, according to Refinitiv IBES data.
“Expectations are so low that there’s a good chance there will be a decent set of earnings reports over the next two or three weeks,” said Grisanti.
An upbeat second-quarter report by PepsiCo Inc lifted Wall Street early on Monday, but the S&P 500 and Nasdaq ended the session lower on new coronavirus restrictions in California and a resurgence in U.S.-China tensions.
The United States on Monday rejected China’s disputed claims to offshore resources in most of the South China Sea. The Trump administration also plans to scrap a 2013 auditing agreement that could foreshadow a broader crackdown on U.S.-listed Chinese firms.
At 7:38 a.m. ET, Dow e-minis were up 153 points, or 0.59%. S&P 500 e-minis were up 12.75 points, or 0.4% and Nasdaq 100 e-minis were up 40.75 points, or 0.38%.
Delta Air Lines edged lower as it warned it will be more than two years before the industry sees a sustainable recovery from the “staggering” impact of the coronavirus pandemic, with demand largely tracking the curve of infections in different places.
Investors will also keep an eye on the Labor Department’s consumer price index (CPI) data for June, expected at 8:30 a.m. ET.
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