By Shreyashi Sanyal
(Reuters) -U.S. stock indexes were set to open higher at the start of another big week for corporate earnings, with Salesforce leading gains on Monday following news that Elliott Management had acquired a stake.
A slew of earnings in the coming weeks will also test the recent bounce in certain technology and growth stocks that took a large hit last year. The tech-focused Nasdaq index was the only major Wall Street benchmark that ended the previous week higher.
Concerns of a possible recession amid a high interest rate environment have hit growth-related sectors, driving major tech companies such as Microsoft Corp, Amazon.com Inc and Alphabet Inc to lay off thousands of employees.
Companies which make up more than half the S&P 500 index’s market value will report earnings in the next two weeks, with Microsoft, the second-largest U.S. firm by market value, posting results on Tuesday, Tesla Inc and IBM on Wednesday and Intel on Thursday.
Analysts now expect year-over-year fourth-quarter earnings from S&P 500 companies to decline 2.9%, according to IBES Refinitiv data, compared with a 1.6% decline at the beginning of the year.
“It’s going to be a situation where I’m expecting to hear weakness, not strength from corporate America,” said Adam Sarhan, chief executive of 50 Park Investments in New York.
“It’s much better to lower expectations and then beat weak expectations then it is to raise your guidance or have strong expectations and then miss.”
Investors also await January manufacturing and fourth-quarter GDP data for a clearer picture of the impact the Federal Reserve’s aggressive rate hikes have had on the economy.
Data recently has signaled cooling inflation but has also highlighted a tight labor market that offers the central bank room to stick with its aggressive policy tightening.
Shares of cloud-based software firm Salesforce Inc rose 4.7% in premarket trading to lead gains among Dow components after activist investor Elliott Management Corp made a multi-billion-dollar investment in the company, according to people familiar with the matter.
At 8:39 a.m. ET, Dow e-minis were up 79 points, or 0.24%, S&P 500 e-minis were up 6.25 points, or 0.16%, and Nasdaq 100 e-minis were up 23.5 points, or 0.2%.
Among other stocks, Baker Hughes Co slid 1.4% on missing fourth-quarter profit estimates, hit by component shortages and supply chain disruptions.
Xylem Inc fell 8.3% on its acquisition of water treatment solutions firm Evoqua Water Technologies Corp in a $7.42 billion deal. Evoqua shares jumped 13.7%.
Qualcomm Inc and Advanced Micro Devices Inc climbed above 2% each, after brokerage Barclays upgraded the chipmakers to “overweight” from “equal-weight”.
Western Digital Corp rose 4.0% on a report that the memory chip maker could merge with Japan’s Kioxia Holdings.
(Reporting by Shreyashi Sanyal and Johann M Cherian in BengaluruEditing by Vinay Dwivedi)