The TSX edged lower and U.S. indexes were nearly unchanged at the open, with a better-than-expected reading on U.S. initial jobless claims unable to offset renewed concerns that the record-breaking market rally on Wall Street is in need of a rest.
The S&P 500 was up 1 point or 0.08 per cent and the Dow Jones industrial average was up 19 points, or just 0.13 per cent. The S&P/TSX composite index was faring worse, down 56 points, or 0.4 per cent. It's being weighed down again by soft commodity prices.
Crude oil futures in New York were down 0.5 per cent at $94.44 after the International Energy Agency lowered its forecasts for oil demand. That came one day after data showed that U.S. inventories have climbed to a 22-year high. Copper was down 0.7 per cent but gold was unchanged.
The tech sector was especially weak this morning after a report Wednesday showed PC shipments falling 14 per cent in the first quarter, their biggest drop ever. Hewlett-Packard Co. opened down 6 per cent. Microsoft, which was also hit with a downgrade to a sell rating from Goldman Sachs, was down 4 per cent. And Research In Motion Ltd. was heading south in sympathy as well, opening down 5 per cent despite little fresh news.
U.S. retailers are reporting same-store sales for March this morning, and results have generally been disappointing because of poor weather, pushing stock values in that sector lower as well.
The U.S. initial jobless claims report garnered more attention than usual, as last week's claims jumped unexpectedly to a four-month high of 385,000 and prompted a rethink of this year's powerful market rally. The data today showed initial jobless claims declining back to 346,000, suggesting that last week's spike was due to seasonal distortions - not a big surprise around spring break.
Both the Dow Jones industrial average and S&P 500 enjoyed their best session in six weeks on Wednesday, closing at record highs. If more evidence had emerged that U.S. employment growth was slowing, it would be increasingly hard for traders to justify buying into a rally this year that has far exceeded the expectation of almost every veteran market observer.
The U.S. employment situation is also feeding into continued speculation over how much longer the U.S. Fed will continue to crank out its aggressive quantitative easing measures. Minutes of the most recent Fed meeting, released on Wednesday, showed considerable disagreement among Fed officials over how much longer it should continue. This morning, the president of the Philadelphia Fed Bank, Charles Plosser, said the Fed should begin scaling back the pace of the bond-buying program starting now, given the improvement already seen in the U.S. labour market. He believes the purchases should end entirely before the end of this year.
Of course, Chairman Ben Bernanke has the final word on such matters, and expressed a commitment months ago to keep the bond buying measures going until unemployment comes down to 6.5 per cent and inflation stays below 2.5 per cent. As such, quantitative easing measures could still be with us for some time.
European markets are higher this morning, but most indexes there are also off their earlier highs. London's FTSE 100 was up 0.2 per cent and Germany's Dax 0.3 per cent.
Japan put in another stellar performance overnight, as markets there continued to react positively to the country's own aggressive easing measures; the Nikkei rose nearly 2 per cent.
Here's a look at some stocks on the move this morning:
Microsoft shares are down nearly 5 per cent after Goldman Sachs downgraded the company to sell, citing worsening PC trends. Goldman is the only research house among the 44 that cover Microsoft with a sell rating, according to Bloomberg.
Hudson’s Bay Co. said its fourth-quarter net income was down compared with a year ago as its Lord & Taylor operations in the United States felt the impact of hurricane Sandy. Shares opened down 0.2 per cent.
Barrick Gold Corp. shares opened down 0.5 per cent, a day after the stock got clobbered on news the company suspended work on its huge gold and silver project in Chile. RBC today cut its price target on Barrick to $32 (U.S.) from $37.
Fortinet Inc. shares are down 19 per cent after forecasting profit and revenue in its latest quarter below analysts' expectations.
Yum Brands Inc. shares are up 0.2 per cent after the owner of KFC and Pizza Hut chains said same-store sales in China slid 13 per cent.
Costco Wholesale Corp. reported a 4 per cent rise in March same-store sales, which missed Street expectations. Its shares are up 0.2 per cent.
The New York Post reported that three more top executives at J.C. Penney have left the ailing retailer following the ouster of chief executive Ron Johnson. Shares are up 0.7 per cent.