(Reuters) – U.S. stock index futures rose on Tuesday as investors geared up for quarterly earnings reports from the big U.S. banks to provide clues on corporate America’s expectations for the pace of an economic recovery in the second half of the year.

An upbeat second-quarter report by PepsiCo Inc (PEP.O) lifted Wall Street early on Monday, but the S&P 500 and Nasdaq ended the session lower on new coronavirus restrictions in California and a resurgence in U.S.-China tensions.

Investors are now bracing for what could be the sharpest drop in quarterly earnings for S&P 500 firms since the 2008 financial crisis, according to Refinitiv IBES data.

JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N), which have substantial lending businesses, could see a sharp plunge in net income in the April-June quarter that witnessed the biggest blow to businesses activity.

JPMorgan and Citi shares edged higher in premarket trading, while Wells Fargo & Co (WFC.N), which is expected to swing to a loss, was flat.

Meanwhile, tensions between Washington and Beijing escalated further after the United States rejected China’s disputed claims to offshore resources in most of the South China Sea.

The Trump administration also plans to scrap a 2013 auditing agreement that could foreshadow a broader crackdown on U.S.-listed Chinese firms.

At 5:59 a.m. ET, Dow e-minis 1YMcv1 were up 101 points, or 0.39%, S&P 500 e-minis EScv1 were up 10.5 points, or 0.33%, and Nasdaq 100 e-minis NQcv1 were up 32 points, or 0.3%.

Investors will also keep an eye on the Labor Department’s consumer price index (CPI) data for June, expected at 8:30 a.m. ET.

Reporting by Medha Singh and Devik Jain in Bengaluru; Editing by Shounak Dasgupta

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