US Stocks: Wall Street heads for muted open amid mixed earnings reports

US stock indexes were set for a subdued open on Tuesday, as investors digested a mixed bag of earnings reports from a flurry of companies ahead of results from megacap firms that could put a recent market rally to test.

Earnings reports from companies including Microsoft and Google-owner Alphabet will offer further clues on the strength of corporate America amid higher Treasury yields and an aggressive Federal Reserve tightening cycle.

“There is a positive view (on technology earnings),” said Giuseppe Sette, president of AI investment platform Toggle. “In a way, their ability to play through an inflationary cycle is strong, especially because tech has always had a very flexible ability to adjust prices.”

Leading premarket gains among Dow components, Coca-Cola Co rose 2.4% after the company raised its annual revenue and profit forecasts, banking on steady demand amid price increases.

3M, on the other hand, fell 2.8% as it cut its full-year revenue and profit forecasts due to a stronger dollar.

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Meanwhile, General Electric Co reversed earlier losses to gain 1.6% after the industrial conglomerate topped quarterly revenue expectations, while General Motors added 2.8% after reaffirming its full-year outlook.

Raytheon Technologies Corp dipped 0.1% after the aerospace supplier trimmed its 2022 sales outlook, while United Parcel Service Inc added 3.0% on posting a stronger-than-expected quarterly adjusted profit.

While earnings reports are expected to influence trading decisions this week,US stock markets rose in the past two sessions after signs of economic softness suggested the effects of the Fed’s policy aimed at curbing decades-high inflation were taking root.

Markets are still pricing in a fourth-straight 75 basis point rate hike from the Fed on Nov. 2, but a report from S&P Global that showed a contraction in business activity this month tempered bets of another jumbo-sized raise in December.

Toggle’s Sette noted that it is not yet a done deal that investors are shifting towards a more dovish Fed. However, “it’s quite possible that we see a classic Fed error.”

The earnings season has been better than expected, with nearly three quarters of the 99 companies in the S&P 500 having beaten estimates as of Monday, according to Refinitiv data.

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At 8:30 a.m. ET, Dow e-minis were down 169 points, or 0.54%, S&P 500 e-minis were down 14.25 points, or 0.37%, and Nasdaq 100 e-minis were down 10.75 points, or 0.09%.

Biogen Inc rose 1.3% hiking its annual profit forecast

Investors will also focus on a report from the Conference Board expected at 10 a.m. ET, which is expected to show consumer confidence declined in October compared to September, as rising interest rates take a toll on consumer spending.