Before the Bell - The U.S. stock market moved lower yesterday, and may well come under pressure again this morning. Overnight, the Nikkei pulled back considerably, and in Europe, the FTSE 100 lost ground, as well. On our shores, the S&P futures are currently off about 16 points, suggesting a soft opening.

Investors will be looking carefully at corporate profits, now that the first-quarter earnings season has commenced. We have already heard from many large financial institutions, and numerous other corporations are weighing in with their results. Yesterday, Dow-30 component Coca-Cola (KO) beat expectations and provided an upbeat view. Earlier today, Johnson & Johnson (JNJ), Procter & Gamble (PG), and Lockheed Martin (LMT) posted their reports. Netflix (NFLX) delivers its numbers in the afternoon. It should be noted that expectations are running high. Wall Street analysts are looking for corporate profits to advance substantially this quarter. In addition, many companies withdrew guidance last year, due to the pandemic, and investors will likely want to see improved visibility. Dividend increases will also probably be expected.

Meanwhile, in economic news, few reports will be released today and tomorrow. However, on Thursday we will get a look at the weekly initial jobless claims, existing home sales, and the leading indicators release. The recent economic news has been encouraging. Of note, the unemployment rate, now at around 6% has fallen, but remains higher than normal, and many on Wall Street will likely want to see continued progress here. 

Elsewhere, investors will be keeping a watchful eye on inflation. No doubt, the central bank’s low interest-rate policy has aided the economy, and has greatly helped the equity markets. The government has already passed various stimulus measures, and plans are in place for additional spending. These developments have some traders worried about mounting inflationary pressures and potential action from the Fed down the road. On a related note, rising commodity prices may suggest some pricing pressure is on the horizon, as well. Meanwhile, the yield on the 10-year Treasury note, now near 1.6%, has moved up over the past several months, suggesting that investors are requiring larger returns on capital. It should be noted that higher bond yields tend to put downward pressure on equity markets.

Finally, the coronavirus pandemic remains an area of concern. Although the vaccine rollout has been progressing, cases remain elevated in parts of the U.S. and in countries, like India and Brazil. The uptick in cases has been attributed to new strains of the virus that may be somewhat impervious to vaccines.

Technically, the S&P 500 Index is not far from record high ground. However, stocks have been trading at very elevated valuations, and some on Wall Street feel complacency has set in. This scenario leaves room for few disappointments. – Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.