(Reuters) – U.S. stock index futures were muted on Monday as investor focus shifted to the Federal Reserve’s policy decision expected this week, while regulators said First Republic Bank has been seized and a deal agreed to sell the bank to JPMorgan Chase & Co.
The benchmark S&P 500 registered a second consecutive monthly gain on Friday, with upbeat reports from Alphabet Inc, Microsoft Corp and Meta Platforms Inc boosting hopes of a strong earnings season even as worries of a U.S. economic slowdown lingered.
Analysts now expect first-quarter earnings for S&P 500 companies to fall 1.9% from a year earlier, compared with a 5.1% fall expected at the start of April, according to Refinitiv data.
However, double-digit gains in shares of Apple Inc, Microsoft and Alphabet this year have sparked a debate if the U.S. market’s biggest tech and growth names are getting too expensive.
Meanwhile, recent economic data have reinforced bets of another 25-basis point interest rate hike following the U.S. Federal Reserve’s two-day policy meeting on Wednesday, with investors pricing in 90% chances of such a move, according to CME Group’s FedWatch tool.
Focus will also be on the statement and Chair Jerome Powell’s press conference to see if the Fed pushes back against market pricing of rate cuts before the year-end amid the recent banking turmoil and threats of an imminent recession.
Meanwhile, First Republic Bank’s shares tanked 38.5% in premarket trading. JPMorgan Chase & Co will buy most of the bank’s assets in a last-ditch rescue led by U.S. regulators.
JPMorgan’s shares rose 2.4%.
The rescue comes after the collapse of Silicon Valley Bank and Signature Bank in March, amid a deposit flight, forced the U.S. central bank to step in with emergency measures to stabilize markets.
The KBW Regional Banking index and the S&P 500 Banks index have lost 22% and 10%, respectively, so far this year.
On Monday, manufacturing data from the Institute for Supply Management and S&P Global for April, and the Commerce Department’s construction spending for March will be parsed for more clues on the Fed’s interest rate trajectory.
On the earnings front, Norwegian Cruise Line Holdings, ON Semiconductor Corp, MGM Resorts International and Franklin Resources Inc are some of the major companies reporting quarterly results before the opening bell.
At 5:45 a.m. ET, Dow e-minis were up 13 points, or 0.04%, S&P 500 e-minis remained unchanged, and Nasdaq 100 e-minis were down 1 point, or 0.01%.
(Reporting by Ankika Biswas in Bengaluru; Editing by Shounak Dasgupta)