Futures extend rally on earnings optimism

By Ankika Biswas and Susan Mathew

(Reuters) – U.S. stock index futures were firmly in positive territory on Tuesday on rising hopes that upbeat corporate earnings would help eclipse the current economic gloom, with a fiscal policy reversal in Britain also boosting risk appetite.

Big U.S. banks have kicked off the quarterly earnings season on a largely positive note, with Bank of America (NYSE:)’s results underpinning a rally in stocks on Monday.

The reversal of parts of a controversial UK fiscal plan that had roiled bond markets also aided sentiment.

“Initial Q3 company reports have been positive, and you’ve had some stabilization in the United Kingdom with its government so I think that and generally oversold conditions have been the real driver of equities last few days,” said Patrick Armstrong, chief investment officer at Plurimi Wealth.

All three of the major U.S. benchmark stock indexes have marked losses of more than 12% over the last two months as investors worry that the U.S. Federal Reserve’s war on inflation may hobble the economy.

Goldman Sachs Group Inc (NYSE:), Johnson & Johnson (NYSE:) and Netflix (NASDAQ:) are among the big-ticket earnings scheduled later in the day, with their shares up between 0.5% and 1.2% in premarket trading. [.N]

“Earnings for Q3 generally will be strong. Companies are well trained to guide analysts to earnings estimates that they could meet and beat,” Armstrong said.

At 05:05 a.m. ET, were up 269 points, or 0.89%, were up 40.25 points, or 1.09%, and were up 142.5 points, or 1.28%.

Microsoft Corp (NASDAQ:) gained 1.3% after a report that it was laying off under 1,000 employees this week, becoming the latest U.S. technology company to cut jobs or slow hiring amid a global economic slowdown.

Major mega-cap technology and other growth names like Apple Inc (NASDAQ:), Meta Platforms, Amazon.com (NASDAQ:) and Nvidia (NASDAQ:) Corp were up between 1.2% and 1.7%.

Analysts now expect profit for companies to have risen just 3% from a year ago, much lower than an 11.1% increase expected at the start of July, according to Refinitiv IBES data.

Industrial production for September due before market open, which is seen rising 0.1% compared to a 0.3% fall in the prior month, will also be on the watch-list.

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