Futures slide amid Middle East tensions; bank results, data take centre stage

Futures for the Wall Street indices declined on Tuesday as investors assessed diplomatic efforts to manage the Middle East conflict and prepared for a wave of US bank earnings and economic data to gain insight into the economic landscape.

US President Joe Biden is scheduled to embark on a high-stakes visit to Israel on Wednesday, following an announcement from Washington that Prime Minister Benjamin Netanyahu has agreed to allow humanitarian aid to reach Gaza. However, concerns about an escalation in the conflict were sparked by a statement from Iran's Supreme Leader, Ayatollah Ali Khamenei, calling for Israeli officials to be put on trial for their actions against Palestinians.

"We had observed a decrease in risk aversion due to efforts to de-escalate the crisis, but the comments from Iran suggest that these efforts may ultimately falter," noted Stuart Cole, Chief Macro Economist at Equiti Capital. "They may not have welcomed the improved relations between Israel and some Arab nations, and thus, they may seek to prolong the conflict, not only to facilitate attacks on Israel through proxy armies but also to disrupt these improving relationships," Cole added.

Investors are also eagerly anticipating the quarterly earnings reports from Bank of America, Goldman Sachs, and Bank of New York Mellon, which are scheduled to be released before the market opens. Some major US banks reported on Friday that higher interest rates had bolstered profits, despite a slowing economy and cautious consumer behaviour.

Pharmaceutical giant Johnson & Johnson and US weapons manufacturer Lockheed Martin will also announce their quarterly earnings before the opening bell. "We believe that the profit recession has come to an end, and the US economy is on track for a somewhat gentle landing, supported by robust consumer activity, moderating inflation, and solid growth," stated Mark Haefele, Chief Investment Officer at UBS Global Wealth Management.

According to LSEG data, third-quarter earnings for S&P 500 companies are expected to have increased by 2.2 per cent, up from an estimated 1.3 per cent increase a week earlier. In addition to earnings reports, investor attention will be focused on economic data, including retail sales and industrial production figures for September, scheduled for release at 08:30 am ET and 09:15 am ET, respectively.

Several Federal Reserve officials, including New York's John Williams, Richmond's Thomas Barkin, Minneapolis' Neel Kashkari, and Board Governor Michelle Bowman, are slated to speak throughout the day. As of 05:09 am ET, Dow e-minis were down 54 points, or 0.16 per cent, S&P 500 e-minis were down 6 points, or 0.14 per cent, and Nasdaq 100 e-minis were down 19 points, or 0.12 per cent. 

Pre-market trading saw a 22.4 per cent drop in NetScout Systems after the enterprise software company lowered its 2024 revenue and profit forecasts.
 

(With Reuters Inputs)