Stock futures opened little changed on Monday evening, as investors awaited a slew of new earnings results to determine the impact of ongoing supply chain concerns and rising costs on corporate America.
A number of major companies are set to report earnings results Tuesday morning, including consumer giants Procter & Gamble (PG) and Johnson & Johnson (JNJ) before market open, and Netflix (NFLX) and United Airlines (UAL) after market close.
The latest quarterly results, guidance and executive commentary from these companies are set to help illustrate the extent of how labor shortages, increasing input costs and lingering pandemic-related concerns have weighed on companies – and whether some firms have managed to more nimbly navigate this confluence of challenges.
“We’re dealing with supply chain challenges because of the unique situation that we’re in right now, where we’ve unleashed a lot of demand before businesses were really ready for it. That may persist for some time, drive volatility, raise some concerns,” Brian Levitt, Invesco global market strategist of North America, told Yahoo Finance Live on Monday. “But ultimately I think the supply-demand imbalances will moderate, enabling this cycle to move on further.”
“What you want to hear from businesses are those that continue to believe that demand is going to be strong, and continue to believe that they have some ability to work through the supply challenges and pass on some of those costs to consumers,” he added. “It’s not a rising tide that lifts all boats type of environment. It’s an economy that’s likely to slow some in here, and pricing pressures are going to be with us a bit … Those businesses that can pass on these costs are going to be the winners.”
The companies that have so far reported third-quarter earnings results — including the big U.S. banks and an assortment of other names like Domino’s Pizza (DPZ) and Delta Air Lines (DAL) — have largely posted better-than-expected profits. Heading into this week, 8% of S&P 500 companies had reported third-quarter results, and 80% of these firms topped consensus estimates, according to FactSet.
6.m. ET Monday: Stock futures point to a lower openSavita Subramian pointed out in a note on Monday, many of these companies had relatively little foreign sales exposure, or less than one-fifth of their overall revenue from international sources. Forthcoming earnings reports from companies with greater reliance international sales may provide an even more comprehensive view of the impact of the global supply chain challenges.
“Supply chain concerns are very, very real,” Wells Fargo CEO and President Charles Scharf told Yahoo Finance’s Editor-in-Chief Andy Serwer during a panel at the Milken Institute Global Conference on Monday. “Inventory levels are down, and people are finding ways to compensate for that. So profit levels overall are very, very strong because people are raising prices, so there is inflation how long that goes on for we can debate, but it is very real.”
“The supply chain problems aren’t going to get solved overnight,” he added. “They will get solved, but until then, I certainly worry about the evenness of [whether] small businesses versus large businesses be able to continue on the same trajectory.”
6:02 p.m. ET Monday: Stock futures point to a lower open
Here’s where markets were trading Monday evening:
S&P 500 futures (ES=F): -1.25 points (-0.03%), to 4,476.25
Dow futures (YM=F): -12 points (-0.03%), to 35,121.00
Nasdaq futures (NQ=F): -0.25 points (-0.00%) to 15,290.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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