Futures Higher Ahead of Earnings Season
U.S. stock index futures climbed Monday, with the S&P on track for its third day higher, ahead of Dow component Alcoa's earnings report, which marks the unofficial start of second quarter earnings season.
Aluminum producer Alcoa is slated to post numbers after Wall Street closes. Analysts polled by Reuters forecast the Dow component to post earnings of 10 cents a share for the second quarter of 2013 on revenue of $5.8 billion, down from sales of $6 billion a year before.
(Read More: Value Remains in Alcoa's Stock: Pro)
"We expect the company to record soft earnings, but most investors will watch out for any cues on its outlook. Aluminum prices are constantly going downhill and demand remains sluggish. Also,aluminum inventory continues to remain high relative to demand, keeping a lid on London Metal Exchange (LME) prices for aluminum," according to research company Trefis in a note.
So far, earnings pre-announcements have been very negative. As of last Friday, the ratio of negative-to-positive corporate comments stood at 6.5 to 1, according to Reuters, more than 2.5 times the normal pace and the most negative reading since 2001.
"We're a little more optimistic than the consensus right now, but any way you slice it, it's not going to be a good earnings season," said BTIG chief global strategist Daniel Greenhaus."Guidance is particularly important since you're going to have much less Federal Reserve accommodation."
(Read More: Traders Keep One Eye on Earnings, the Other on Bonds)
The CNBC Fed Survey, taken right after Friday's jobs report, showed that on average, analysts now forecast the Fed will start scaling back its asset purchasing program in November. An earlier survey, taken a little over two weeks ago, showed the average forecast was for December.
Major averages finished in positive territory for the second-consecutive week, with the Dow rallying nearly 150 points lat Friday following an upbeat government jobs report. Small-cap stocks hit new record highs with the Russell 2000 index settling above 1,000 for the first time.
Meanwhile, worries that Friday's upbeat U.S. jobs report could lead the Fed to unwind stimulus measures later this year weighed on Chinese stocks on Monday. The Shanghai Composite fell 2.4 percent to a one-week low, also hit by the news that Beijing will no longer extend credit to sectors that struggle with overcapacity.
"Chinese growth is once again being called into question... the market is thinking longer term and how a reduction in credit growth north of $100 billion will impact the economy," said Chris Weston, chief market strategist at IG, in a research note.
Dell gained after investment advisory firm ISS recommended the company's shareholders vote in favor a $24.4 billion offer for the PC maker from founder and CEO Michael Dell, saying the $13.65 per share offer provides "certainty of value."
Monday will be a quiet day for U.S. economic reports, with just consumer credit numbers for May scheduled for release.
Barclays analysts Hamish Pepper and Laurent Fransolet forecast consumer credit rose by $11 billion in May.
"As has been the case in recent months, we expect this to consist of a small gain in revolving credit, accompanied by a more significant rise in non-revolving credit, driven largely by federal student loans," the analysts said in a research note published on Monday.
"The budgetary procedure that is in place in the United States, which leads to a budgetary adjustment, seems to us absolutely inappropriate... because it blindly affects certain expenditures that are essential to support medium and long term growth," Lagarde told an economics conference in Aix-en-Provence, southern France.
Plus, benchmark Brent crude oil prices may extend last week's rally to test $110 a barrel this week, amid lingering fears of Middle East supply disruptions and expectations of improving U.S.demand, according to CNBC's latest market sentiment survey.
Coming Up This Week:
MONDAY: Consumer credit; Earnings from Alcoa
TUESDAY: NFIB small biz index, 3-yr note auction, IMF world economic outlook
WEDNESDAY: MBA mortgage applications, wholesale trade, oil inventories, 10-yr note auction, FOMC minutes; Earnings from Family Dollar, Yum Brands, Chevron (interim report)
THURSDAY: Jobless claims, import & export prices, natural gas inventories, 30-yr bond auction, Treasury budget, Fed balance sheet/money supply, chain store sales, Nokia event
FRIDAY: Producer price index, consumer sentiment; Earnings from JPMorgan, Wells Fargo, Infosys