Wall Street ticks higher ahead of another busy earnings week

Wall Street is pointing modestly higher in subdued trading early today ahead of another busy week of corporate earnings reports that should offer clues about how businesses are faring under sustained inflationary pressures.

Futures for the S&P 500 rose about 0.1% and futures for the Dow Jones Industrials are up 0.2% before the bell.

The focus this week will be on the ability of U.S. corporations to navigate higher costs as the Federal Reserve and the world’s other central banks hike interest rates to cool inflation.

“Earnings expectations for this quarter are not brilliant,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “But the good news is, the expectations are driven by conversations with corporate executives which love sounding pessimistic, so that when the results come in better than expected, the market reaction could be positive despite soft results.”

Prometheus Biosciences jumped nearly 70% in premarket trading after the San Diego biotechnology company announced over the weekend that it was being acquired by Merck for $200 per share, or about $10.8 billion.

M&T Bank Corp. is up about 3% before the bell after the Buffalo, N.Y., bank announced strong profit and revenue for the first quarter. Deposits at M&T were down, but not as much as some had forecast in the wake of the collapse of two other regional banks in March. Regional banks are getting a closer look this quarter, particularly deposit levels, after bank runs sent tremors through the financial sector.

Earnings for the week kick off Tuesday with Netflix, United Airlines, Bank of America and Johnson & Johnson posting quarterly results.

In Europe at midday, France’s CAC 40 and Germany’s DAX each nudged down 0.1%, while Britain’s FTSE 100 added 0.2%.

Japan’s benchmark Nikkei 225 inched up nearly 0.1% to finish at 28,514.78. Australia’s S&P/ASX 200 edged up 0.3% to 7,381.50, while South Korea’s Kospi rose 0.2% to 2,575.91. Hong Kong’s Hang Seng added 1.7% to 20,782.45. The Shanghai Composite gained 1.4% to 3,385.61.

“Markets suffer from more heat than light as hyper-sensitivity of Fed policy projections to U.S. data continues to infuse out-sized volatility,” said Tan Boon Heng at Mizuho Bank.

China’s central bank kept the one-year medium-term lending facility rate unchanged at 2.75%, suggesting economic growth data to be released Tuesday won’t be too alarming.

“Investors remain more concerned about weak inflation, implying subdued demand recovery post-reopening. Hence sentiment remains downbeat, compounded by the fact that ex-China recession risks remain high,” said Stephen Innes, managing partner at SPI Asset Management.

High interest rates stifle inflation by slowing the economy, raising the risk of a recession and dragging on prices for investments.

Last week, a top Fed official said inflation remains far too high and more tightening may be needed. Christopher Waller, a member of the Fed’s governing board, also said that even after hikes to rates end, they will likely need to stay high for longer than markets expect.

After his comments, traders built bets that the Fed will raise rates at its next meeting in May, instead of taking its first pause in more than a year.

A report on Friday also showed U.S. shoppers cut their spending at retailers more than expected. Much of that was due to falling gasoline prices.

In energy trading, benchmark U.S. crude fell 43 cents to $82.09 a barrel. Brent crude, the international standard, declined 41 cents to $85.90 a barrel.

In currency trading, the U.S. dollar inched up to 133.83 Japanese yen from 133.75 yen. The euro cost $1.0980, down from $1.0997.