By Anna Hirtenstein 

U.S. stock futures edged up Tuesday as investors digested second-quarter results from the biggest banks for insights into the health of the American economy and its lenders.

Futures tied to the S&P 500 ticked up 0.4%, suggesting that U.S. stocks could rise after the opening bell. A rally in the equity market on Monday fizzled after California rolled back some of its reopening plans, stoking fears about additional lockdowns.

A string of earnings reports out on Tuesday from major Wall Street banks was being scrutinized for the effect of the downturn on the flow of credit to businesses, and on borrowers' ability to repay loans. JPMorgan Chase kicked off the earnings season with its results this morning, followed by Citigroup and Wells Fargo.

Investors were likely to be interested in banks' trading activities, which will show how they've coped in such a volatile market, said Luc Filip, head of private banking investments at SYZ Private Banking. "We'll have a bit more clarity on the reality of the recovery theme, from the bottom up."

Shares of JPMorgan Chase rose 2.5% premarket after the bank reported earnings per share for the second quarter that beat estimates. Other major bank stocks also advanced, with Goldman Sachs rising 2.3% and Morgan Stanley up 2.5%.

Wells Fargo's shares declined 3.1% after it reported a $2.4 billion net loss and said it intends to cut its dividend next quarter. Citigroup's climbed 1.6% after it said its revenue rose, but its net income slipped due to a higher allowance for credit-loss reserves due to the economic downturn.

"This shows that there's a three-speed recovery in the economy," said Sebastien Galy, a macro strategist at Nordea Asset Management. "Some banks will be better positioned than others" during times of volatility, particularly in the case of JPMorgan who is a key player in market-making. "Each bank is telling you something different about the underlying economy," he said.

Meanwhile, shares of Delta Air Lines shed 1.2% after it reported a pre-tax loss of $7 billion, but said it had $15.7 billion of liquidity at the end of the quarter to help keep the company afloat.

In Europe, the pan-continental Stoxx Europe 600 slipped 1.1%, led lower by stocks in Germany and France. Industrial production in the eurozone is recovering slower than expected and is still over 20% lower than last year, according to a Tuesday data release. A gauge of sentiment for institutional investors in July also came in below expectations.

"It's the virus-related newsflow at the same time as we're going into an earnings season that's unpredictable and we're getting some weaker economic data, it's the combination of all these things," said Georgina Taylor, a multiasset fund manager at Invesco. "Given the good run in equities, it feels like the market is pausing to digest all of this."

Fresh data showed that the U.K's economic expansion in May was weaker than economists had expected, and output in Britain remains around a quarter below the level it had reached in February, before the pandemic struck and the economy was shut down. The British pound edged down 0.3% against the dollar.

"For the U.K., it's a tough gig currently. The drop in GDP was starker than on the continent and now the bounceback is weaker," said Peter Schaffrik, global macro strategist at RBC Capital Markets. "It's a pretty big miss."

In Asia, major benchmarks slipped after tensions between the U.S. and China rose, prompted by Secretary of State Mike Pompeo's comments on Monday that the Trump administration formally rejects a swath of Chinese claims in the South China Sea. China's main stocks gauge, the Shanghai Composite Index, declined 0.8%.

"As we're getting closer to the U.S. election in November, we expect some noise to be happening," said SYZ's Mr. Filip. "The objective for the U.S. is to show strength, maybe flex muscle."

Investors are also awaiting consumer price data from the U.S., which is scheduled to be released at 8:30 a.m., and will show if inflation has picked up as lockdowns have eased.

In government bond markets, the yield on U.S. 10-year Treasurys slipped to 0.629% Tuesday, from 0.638% Wednesday. Bond yields and prices move in opposite directions.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

(END) Dow Jones Newswires

July 14, 2020 08:42 ET (12:42 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.