Jennifer Dowty
Jennifer Dowty, Chartered Financial Analyst, writes exclusively for Globe Unlimited subscribers. The Before the Bell report is updated throughout the premarket to reflect latest developments.
Good Tuesday morning to you. Well, after seven consecutive days of losses for the S&P/TSX composite index, it appears that the losing streak will end today. The S&P/TSX 60 Index Futures are positive this morning as are U.S. futures, with the Dow, S&P 500, and Nasdaq futures all pointing to a solid, positive opening for the markets.
This is a refreshing change from the past several trading sessions. On Monday, the S&P/TSX composite index experienced another triple-digit loss and it was difficult for investors to find safe havens in the market. Only 16 stocks closed in positive territory, evidence that the S&P/TSX composite index is not immune to Chinese market volatility since China is the world's second largest economy.
On the earnings front, there are eight companies in the S&P/TSX composite index that have confirmed they will be reporting financial results today. According to Bloomberg, WestJet and MEG Energy both reported better-than-expected earnings this morning, while Husky Energy's earnings fell short of the Street's expectations.
The remaining five companies, New Gold, Toromont, Sherritt, DH Corp., and Centerra Gold, will report after the bell.
Now for the earnings scorecard: according to Bloomberg, 17 companies in the S&P/TSX composite index have reported since July 20. Of those less than half, 47 per cent, have beat the Street's top line, or revenue, expectations. However, more companies have been able to beat the Street's expectations based on earnings. Eleven companies, or 65 per cent, have reported better-than-expected earnings per share results compared to the consensus earnings estimate. Meanwhile, growth has been lacking, with sales growth averaging just 0.4 per cent and earnings growth of -3.2 per cent.
In the U.S., a two-day Federal Open Market Committee meeting kicks off today with a statement to be released on Wednesday that may provide investors with some insights as to the timing of a future interest-rate hike. Also of interest will be second quarter GDP released on Thursday.
On the commodity front, oil and gold prices are slightly down, but just fractionally, as these commodity prices attempt to stabilize. Crude is currently down near the $47 (U.S.) level and gold is sitting just below the $1,100 (U.S.) an ounce level.
Major European markets are higher today, recovering much of their losses from Monday. The German, French, and Italian indices are all up more than 1 per cent. Meanwhile, the London market is up nearly 1 per cent. European markets continue to climb higher during today's trading session. Meanwhile, Greek citizens attempt to resume normal business activity; however, the Athens Stock Exchange General Index remains closed. Alexis Tsipras, the Greek Prime Minister, will resume discussions with creditors today on a bailout package.
Overseas in Asia, Chinese markets managed to bounce back from larger losses earlier in its trading session. The Shanghai Stock Exchange composite index closed down 1.7 per cent, and the Shenzhen Stock Exchange composite index declined 2.2 per cent. Larger losses were erased on reports that the Chinese central bank will inject 50 billion yuan into money markets, and that the People's Bank of China (PBOC) may continue to take monetary actions necessary such as lowering interest rates or relaxing reserve requirements in order to support the Chinese economy. A PBOC meeting will take place in August to discuss monetary policy measures and China's economic situation.
The Bottom Line: Expectations of further intervention by Chinese authorities is serving to calm the markets and today should be a positive day for North American equity markets. However, the market volatility and downtrend, I believe, remains intact.
Now, here is a closer look at major markets and news.
MARKET DATA:
Futures
S&P 500 +0.40 per cent; Dow +0.32 per cent; Nasdaq: +0.29 per cent
Equities
Hong Kong's Hang Seng +0.62 per cent
Shanghai composite index -1.68 per cent
Japan's Nikkei -0.10 per cent
London's FTSE 100 +0.84 per cent
Germany's DAX +1.47 per cent
France's CAC 40 +1.31 per cent
Stoxx 600 +1.32 per cent
Commodities
WTI crude oil (Nymex Sep) +0.06 per cent at $47.42 (U.S.) a barrel
Gold (Comex Dec.) -0.18 per cent at $1,094.90 (U.S.) an ounce
Copper (Comex Sep) +0.89 per cent at $2.37 (U.S.) a pound
Currencies
Canadian dollar at 76.94 (U.S.), +0.23
U.S. dollar index +0.40 at 96.91
Bonds
U.S. 10-year Treasury yield 2.26 per cent, -0.01
ECONOMIC INDICATORS:
(8:30 a.m. ET) Canada industrial product price index for June. Consensus is an increase of 0.2 per cent from May.
(8:30 a.m. ET) Canada raw materials price index for June. Estimate is an increase of 1.5 per cent from previous month
(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index for May. Consensus is an increase of 0.2 per cent from April and a 5.3-per-cent increase year over year
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for July. Consensus is 100.0, a decline from 101.4 in June.
STOCKS TO WATCH:
WestJet Airlines Ltd. reported a 19 per cent rise in quarterly profit, helped by lower fuel costs and addition of new routes. The company's net earnings rose to $61.6-million, or 49 cents per share, in the quarter ended June 30 from $51.8-million, or 40 cents per share, a year earlier. Revenue rose 1.3 per cent to $942-million. Cost per available seat mile, a measure of how much an airline spends to fly a passenger, fell 8.1 per cent to 12.65 cents.
Husky Energy Inc., Canada's No. 3 integrated oil company, reported a nearly 81 per cent fall in quarterly profit as it struggles to cope with weak oil and gas prices. The company's net income fell to $120-million, or 10 cents per share, in the second quarter ended June 30, from $628-million, or 63 cents per share, a year earlier.
Ford Motor Co. second-quarter earnings widely beat Wall Street expectations, based on the continued strength of its North American sales. Ford maintained its full-year 2015 forecast of an operating profit of between $8.5-billion to $9.5-billion. Ford made a net profit of $1.89-billion, or $0.47 per share. There were no one-time items and the 47 cents per share beat analyst expectations of 37 cents per share, according to Thomson Reuters I/B/E/S. Ford's quarterly revenue of $37.3-billion also beat expectations of $35.34-billion.
ANALYST ACTIONS:
Encana Corp. (ECA-N; ECA-T) was raised to "Outperform" from "Market Perform" at FirstEnergy Capital. The 12-month target price is $11.50 (U.S.) per share.
LinkedIn Corp. (LNKD-N) was rated new "Buy" at MKM Partners. The 12-month target price is $285 (U.S.) per share.
News Corp. (NWSA-Q) was raised to "Outperform" from "Neutral" at Macquarie. The 12-month target price is $16.43 (U.S.) per share.
PayPal Holdings Inc. (PYPL-Q) was rated new "Buy" at Jefferies. The 12-month target price is $44 (U.S.) per share.
Quote of the Day: "When you get to the end of your rope, tie a knot and hang on." Franklin D. Roosevelt
Jennifer Dowty