Wall Street set for quiet open as investors await earnings

By Yashaswini Swamynathan

REUTERS - U.S. stocks were set for a muted open on Tuesday as investors await the earnings season to test if Wall Street's record levels are justified by corporates' performance in the fourth quarter.

Investors are also waiting for U.S. President-elect Donald Trump's news conference on Wednesday, his first since his election win in November, for further clarity on his promised policy changes.

U.S. equities have been on a record-breaking surge since the Nov. 8 election of Trump, who has pledged tax cuts, simpler regulation and fiscal stimulus.

However, the rally's momentum has stalled of late as investors now wait to see if he can deliver on those promises and as valuations soar - the S&P 500 is trading at about 17 times expected earnings, compared to its 10-year average of 14.

"It's the increasing weight of valuation in the market that maybe leading to less enthusiasm in 2017. The dollar is going to be a very important factor for the earnings season," said Stephen Wood, chief market strategist, North America for Russell Investments.

"We expect a choppy, range-bound U.S. equity market until we get more clarity on earnings."

Dow e-minis were down 19 points, or 0.1 percent at 8:32 a.m. ET, with 18,111 contracts changing hands.

S&P 500 e-minis were down 0.75 points, or 0.03 percent, with 101,687 contracts traded.

Nasdaq 100 e-minis were down 1 point, or 0.02 percent, on volume of 16,671 contracts.

The dollar index has risen 4.3 percent since Trump's victory. A strong dollar crimps U.S. companies' revenue from overseas markets.

However, S&P 500 companies overall are set to post their strongest quarterly growth in three years, with earnings estimated to have risen 5.8 percent in the fourth quarter, according to Thomson Reuters I/B/E/S.

Wall Street's march has pushed Dow Jones Industrial Average to within a hair's breadth of hitting the 20,000-point mark, helped largely by a frenetic run up in bank stocks.

Big banks including JPMorgan, Bank of America and Wells Fargo will provide the first peek into how companies fared in the quarter when they report on Friday.

The Nasdaq closed at a record high on Monday, helped by a string of buyout deals in the healthcare sector, while a drop in oil prices weighed on the Dow and the S&P 500.

Oil prices were steady on Tuesday, but health stocks were again among the top movers premarket.

Valeant shares surged 11 percent to $17.07 after the drugmaker agreed to sell its Dendreon cancer business and three skincare brands for about $2.12 billion as the troubled firm looks to pay down its more than $30 billion debt.

Illumina rose 14.8 percent to $158 after the diagnostics company gave a strong quarterly forecast and launched a new product.

Williams Cos fell 9.7 percent to $28.84 after it announced a series of transactions aimed at, among other thing, minimizing equity needs, reducing leverage and charting a path for distribution growth.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D'Souza)