U.S. Stock ETFs in Muted Trading Ahead of Earnings Season

U.S. markets and stock ETFs slipped as traders grow cautious ahead of the earnings season with big bank names reporting Friday.

On Thursday, the Invesco QQQ Trust (NASDAQ: QQQ) fell 0.3%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) was 0.2% lower and SPDR S&P 500 ETF (NYSEArca: SPY) dropped 0.1%.

“We’ve had this very large rally without much of a breather since Christmas,” Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, told Reuters. “And now we’re waiting for confirmation from the economic data or from earnings that the rally we’ve seen is justified.”

Traders and analysts have evinced concern over the coming earnings season, especially as companies have lowered profit forecasts on their first quarter results, the Wall Street Journal reports. Consequently, trading activity has slowed while many investors take a wait-a-see approach before making big bets ahead of the corporate announcements – on Wednesday, fewer shares changed hands than any other day of the year so far.

“Markets are in a wait-and-see mode, waiting for the next catalyst,” U.S. Bank Wealth Management chief equity strategist Terry Sandven, told the WSJ. “Global growth remains sluggish but that also means the Fed has shifted to a cautious tone, which provides some comfort for markets.”

J.P. Morgan and Wells Fargo will kick off the earnings season on Friday, with several other prominent corporate names expected to file quarterly earnings next week.

“Expectations for first-quarter results have been ratcheted down on the heels of sluggish global growth, so the bar is low and it could set the stage for upside surprises,” Sandven added.

Traders have also closely monitored developments between the U.S.-China trade talks. Beijing has tried to sweeten its offer by opening its cloud-computing sector to foreign companies in a bid to push along a trade deal after U.S. negotiators rejected an earlier proposal.

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