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Colin Cieszynski

The Before the Bell report is compiled by editors of The Globe and Mail and is updated throughout the morning to reflect latest developments. Colin Cieszynski, Chartered Financial Analyst and Chartered Market Technician, is chief market strategist with CMC Markets.

Stocks bend but don't break, tons of earnings to react to, oil recovery continues.

Sometimes things come better late than never. I had originally planned to use the title above for my Asia Pacific note yesterday afternoon but that plan was stymied by the late day selloff in U.S. indices.

Overnight, however, trading conditions have improved for the most part. Despite the downward momentum coming out of the U.S., stocks in Hong Kong and Australia moved higher overnight and another selloff in China was once again contained to mainland indices. This morning, U.S. stock index futures are essentially flat, refusing to follow European markets lower while crude oil is climbing again.

Between the dovish Federal Open Market Commitee statements yesterday, the huge increases in U.S. oil inventories, mixed earnings, soft guidance, and ongoing market turmoil in mainland China, bears have every reason to grab markets by the throat and drive them even further into the ground. Yet they can't, indicating that the bears are near exhaustion and that the big selloff earlier this month has already priced in weaker expectations for 2016.

This leaves many markets, particularly stocks, in transition with dominance starting to pass over to the bulls who remain tentative at this stage. Because of this, the bumpy bottoming process we have been seeing may continue for a while, creating significant intraday swings that provide opportunities for shorter-term trading strategies.

There have been a ton of earnings reports out overnight with strong reports out of Facebook, corporate tech companies like Qualcomm and Citrix, homebuilders like Pulte and automakers Ford and Harley-Davidson. One theme running through this is strong spending on big-ticket items like cars and houses. Because of this, at the broader level, today's U.S. durable goods report could get attention from traders looking for confirmation.

In Canada, Potash takes centre stage and could get crushed today following a triple whammy of an earnings miss, very weak guidance and a big dividend cut. Ouch! Methanex's earnings were soft as well. Between these reports, crude oil rising, gold pulling back a bit, we could see a day of mixed trading on the Toronto Stock Exchange.

In currrency trading this morning, the U.S. dollar is down slightly while the New Zealand dollar has taken a large hit on their dovish central bank statements. On the oil rally, the Canadian dollar is holding steady as the loonie digests recent gains while Russian ruble is staging a catch-up rally. The British pound is strengthening with U.K. gross domestic product coming in as expected. The Japanese yen is down slightly with the street still at odds over what may come out of tonight's Bank of Japan meeting.

Now, here is a closer look at key market data, and corporate and economic news.

MARKET DATA:

Futures

S&P 500 +0.12 per cent; Dow -0.04 per cent; Nasdaq: +0.55 per cent

Equities
Hong Kong's Hang Seng +0.75 per cent
Shanghai composite index -2.91 per cent
Japan's Nikkei 225 -0.72 per cent
London's FTSE -0.99 per cent
Germany's DAX -1.54 per cent
France's CAC 40 -1.26 per cent

Commodities
WTI crude oil (Nymex March) -0.06 per cent at $32.27 (U.S.) a barrel
Gold (Comex April) +0.33 at $1,119.90 (U.S.) an ounce
Copper (Comex March) -0.70 per cent at $2.05 (U.S.) a pound

Currencies

Canadian dollar +0.01 at 70.93 cents (U.S.)
U.S. dollar index -0.01 at 98.99

Bonds
U.S. 10-year Treasury yield +0.007 at 2.0010 per cent

KEY ECONOMIC RELEASES

Japan retail sales
Euro area economic confidence
Germany consumer price index

(8:30 a.m. ET) Canada Survey of Employment, Payrolls, and Hours for November.
(10 a.m. ET) U.S. pending home sales for December. Consensus is an increase of 1 per cent from November.

**

New orders for long-lasting U.S. manufactured goods tumbled in December as lower oil prices and softer global demand put more pressure on factories, the latest sign that economic growth weakened significantly at the end of 2015.

The Commerce Department said on Thursday that durable goods orders declined 5.1 per cent last month, likely also weighed down by a strong dollar, after slipping 0.5 per cent in November.

Economists polled by Reuters had forecast durable goods orders, which cover goods meant to last three years or more ranging from toasters to aircraft, falling 0.6 per cent last month.

**

The number of Americans filing for unemployment benefits fell from a six-month high last week, suggesting the U.S. labour market recovery remains intact despite a sharp stock market sell-off and signs the economy has lost significant momentum.

Initial claims for state unemployment benefits dropped to a seasonally adjusted 278,000 in the week ended Jan. 23 from 294,000 the prior week, the Labor Department said on Thursday.

Economists polled by Reuters had forecast claims falling to 282,000 in the latest week. Claims have been volatile in recent weeks because of difficulties adjusting the figures to account for seasonal fluctuations.

KEY CORPORATE NEWS

Potash Corp. of Saskatchewan Inc. has slashed its dividend as it grapples with a dismal market for fertilizer.

A glut of its namesake crop nutrient has pushed down prices and forced the Saskatoon-based company to take drastic action to deal with oversupply. Earlier this month, Potash Corp. suspended production at its new Picadilly, N.B., potash mine, laying off more than 400 workers.

"Weaker fertilizer prices late in the year reduced our earnings for the quarter," chief executive Jochen Tilk said in a news release. As a result, he said, "we made the very difficult decisions to suspend potash production in New Brunswick and realign our dividend."

The quarterly dividend will fall by 34 per cent, to 25 cents (U.S.) a share. On an annual basis, the dividend now works out to $1 a share, down from $1.52 before the announcement.

**

Canadian oil and natural gas producer Penn West Petroleum Ltd. cut its 2016 capital budget by as much as 90 per cent from a year earlier, to weather a steep plunge in crude oil prices.

The company, which cut its capex to $50-million, said it expects to produce 60,000-64,000 barrels of oil equivalent per day this year, about 30 per cent lower than its 2015 production estimate.

Penn West had cut its 2015 capital budget three times, eliminated about 35 per cent of work force in September and stopped paying dividend from October.

**

Bombardier Inc. was sued on Wednesday for at least $14.2-million by a unit of Comerica Inc, after the Canadian aircraft maker was unable to find buyers for four planes whose leases had expired.

According to a complaint filed in the U.S. District Court in Manhattan, Comerica Leasing Corp was the beneficiary under owner trusts that had bought the planes from Bombardier, and then leased them for 16-1/2 years to a predecessor of SkyWest Inc's ExpressJet unit.

**

Facebook Inc. smashed investors' expectations with a 52-per-cent jump in quarterly revenue as it sold more ads targeted at a fast-growing number of mobile users, sending its shares sharply higher after hours.

The world's biggest online social network bucked the trend of underwhelming tech results from Apple Inc and eBay Inc, in the face of economic uncertainty around the world and a strong U.S. dollar depressing the value of overseas sales.

**

U.S. auto parts maker Johnson Controls Inc. reported lower-than-expected first-quarter revenue, hurt by weak sales in its automotive seating and interiors business.

Sales in its automotive unit, which makes car seats and interiors for companies such as Toyota Motor Corp. and General Motors Co., fell 19.9 percent to $4.23 billion in the first quarter, from a year earlier.

The automotive unit accounted for a little over half of its sales in 2015.

**

Raytheon Co. on Thursday reported higher-than-expected fourth-quarter profit despite the impact of accounting adjustments from a large acquisition, and forecast higher earnings and revenues for 2016.

International sales hit a record 31 percent of overall revenues in 2015 and should be roughly in the same range this year, given continued demand for missiles and missile defense equipment, Chief Financial Officer Toby O'Brien told Reuters.

He also said Raytheon still expected to book an order from Qatar for an early warning radar valued at nearly $1 billion in 2016.

**

Earnings include: Abbott Laboratories; Airgas Inc.; Amazon.com Inc.; Blackstone Group LP; Bristol-Myers Squibb Co.; CR Bard Inc.; Canadian Oil Sands Ltd.; Caterpillar Inc.; Celgene Corp.; Eastman Chemicals Co.; Electronic Arts Inc.; Eli Lilly and Co.; Ford Motor Co.; Harley-Davidson Inc.; Invesco Ltd; JetBlue Airways Corp.; Johnson Controls Inc.; McCormick & Company Inc.; Mead Johnson Nutrition Co.; Microsoft Corp.; Norbord Inc.; Nucor Corp.; Raytheon  Co.; Regis Corp.; Sherwin-Williams Co.; Stanley Black & Decker Inc.; T. Rowe Price Group Inc.; Teranga Gold Corp.; Time Warner Cable Inc.; Under Armour Inc.; Valero Energy Corp.; Visa Inc.; WestRock Co.; Xcel Energy Inc.

Also see: Wednesday's small-cap stocks to watch

ANALYST ACTIONS:

Mizuho Securities upgraded SanDisk from Neutral to Buy with a price target of $86.50.

Jefferies U.S. Internet Team reiterated a Buy rating and boosted its price target on Facebook to $145.

With files from wire services

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