Stock index futures dropped on Tuesday after Alcoa posted worse-than-expected results and Chevron warned that its income would be sharply lower in a disappointing to start to earnings season.
Fellow Dow component Chevron Corp
With Alcoa setting the earnings stage with a negative report, investors will be questioning the extent and durability of the economic recovery, said Andre Bakhos, president of Princeton Financial Group in North Brunswick, New Jersey. Eventually it always comes down to earnings, and this is a disappointing start to the season.
S&P 500 futures fell 8.2 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dropped 71 points, and Nasdaq 100 futures lost 14 points.
Electronic Arts Inc
Also weighing on overall sentiment, China's central bank signaled in its open market operations it was tightening monetary conditions at a faster-than-expected pace in response to increasing concerns about an overheating economy.
U.S. industrial shares lifted the Dow and the S&P 500 on Monday to new 15-month highs after China bolstered expectations the world economy would strengthen, but Nasdaq fell on profit-taking in technology stocks.
(Reporting by Edward Krudy; editing by Jeffrey Benkoe.)