Stock Futures Rise Despite Alcoa's Weak Quarter
New York (Apr 12) Stock futures turned higher on Tuesday morning despite Alcoa (AA - Get Report) , which unofficially kicks off earnings season, reporting weak first-quarter results.
S&P 500 futures rose 0.2%, Dow Jones Industrial Average futures added 0.3%, and Nasdaq futures gained 0.2%.
Alcoa fell more than 4% in premarket trading after missing revenue estimates in its first quarter on an aluminum slowdown. The industry bellwether reported a 15% slide in revenue to $4.9 billion, its third straight quarter of declining sales. Analysts estimated sales of $5.2 billion. Adjusted earnings of 7 cents a share were down from 28 cents a year earlier.
The company also said it could cut up to 2,000 jobs, adding to the 600 jobs already eliminated this year and further 400 cuts planned. CEO Klaus Kleinfeld said that the layoffs would be mostly in Alcoa's aerospace-parts business and would be spread across many countries.
Forecasts for the rest of the earnings season look disappointing. Analysts anticipate earnings for companies in the S&P 500 will fall 7.9%, their fourth straight quarter of decline and the steepest drop since the second quarter of 2009.
Forecasts that U.S. shale oil output would decline in May boosted crude on Tuesday. The Energy Information Administration expects output at the Eagle Ford shale formation in Texas to decline by 62,000 barrels a day next month, while the Bakken shale region is expected to drop of 31,000 barrels a day.
West Texas Intermediate crude oil added 0.6% to $40.64 a barrel, while Brent crude hit a 2016 high of $43.53 a barrel overnight. The commodity closed at its first settlement above $40 since March 22 on Monday after Russia predicted flat production next year and ahead of a weekend meeting of the Organization of Petroleum Exporting Countries. Commodity traders hope OPEC can come to an agreement on a production freeze.