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.
Although Japan's Nikkei managed to eke out a small gain on a day when many Asia Pacific markets were closed for the Lunar New Year holiday, European indexes like Germany's Dax and London's FTSE are down more than 2 per cent while U.S. index futures for the Dow and S&P 500 are down about 1.5 per cent. Today's declines appear to be due to a number of factors including the holiday in Asia, falling oil prices and ongoing reaction to Friday's U.S. nonfarm payrolls report.
Crude oil is falling again today with West Texas intermediate down 3.5 per cent, as another round of rumours last week about an emergency suppliers meeting amounted to nothing more than wishful dreaming again. Meanwhile, the U.S. nonfarm payrolls report showed job growth slowing but probably not enough to knock the Fed off course, suggesting that the liquidity adjustment in U.S. markets will continue. The one weekend development that appears to have had no impact on markets is North Korea's rocket launch, with gold standing pat and Japanese stocks going up.
The end of the liquidity party and transition to rising U.S. interest rates may be particularly evident today on Nasdaq trading, where we have been seeing a valuation crunch on formerly high-flying momentum plays that have been coming back to earth. In addition to the 40 per cent drop in LinkedIn on Friday, Amazon.com has also been falling. This appears to be continuing today with Nasdaq futures trading down 2.3 per cent compared with Dow futures down 1.4 per cent.
Today's Nasdaq trading may also help to settle differing signals from indexes. While the Dax and Italy's FTSE MIB have broken their 2015 lows and continue to fall, suggesting a new bear trend, other major indexes like the Dow and FTSE plus crude oil have been holding above their January lows and are even further above their 2015 lows, indicating base building. The Nasdaq 100, having broken 4,000, is approaching a retest of its January lows near 3,920, where success or failure could indicate if we are really heading into a big bear market or nearing the end of a big correction within a bull market.
With crude oil down we will likely see some pressure on Canadian energy stocks today, and the loonie is already succumbing to the pressure. Meanwhile, Cameco may see selling pressure after the uranium producer reported results below expectations and guided 2016 revenues down 5 per cent over the weekend.
Although things have been looking bleak for the markets lately, Sunday's Super Bowl result could give some longer-term encouragement to the bulls. Denver won its third Super Bowl last night, defeating Carolina 24-10. Here's some quick facts:
*The last two times Denver won the Super Bowl, in 1998 and 1999 the Dow finished 26.7 per cent and 19.5 per cent, respectively.
*The last time Carolina lost the Super Bowl in 2004, the market finished the year up 8.9 per cent.
*The last time Peyton Manning won the Super Bowl in 2007, the Dow finished the year up 3.5 per cent but average up 9.2 per cent following his three previous Super bowl appearances.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -1.6 per cent; Dow -1.5 per cent; Nasdaq: -2.4 per cent; TSX 60 -1.0 per cent
Equities
Hong Kong's Hang Seng Closed for holiday
Shanghai composite index Closed for holiday
Japan's Nikkei 225 +1.10 per cent
London's FTSE -2.21 per cent
Germany's DAX -2.90 per cent
France's CAC 40 -2.90 per cent
Commodities
WTI crude oil (Nymex March) -3.50 per cent at $29.81 (U.S.) a barrel
Gold (Comex April) +1.64 per cent at $1,176.60 (U.S.) an ounce
Copper (Comex March) -1.19 per cent at $2.08 (U.S.) a pound
Currencies
Canadian dollar -0.0043 at 71.57 cents (U.S.)
U.S. dollar index +0.161 at 97.192
Bonds
U.S. 10-year Treasury yield -0.02 at 1.82 per cent
KEY ECONOMIC RELEASES
The value of Canadian building permits jumped more than expected in December, driven by increased construction intentions for multi-family homes across much of the country, data from Statistics Canada showed on Monday. The 11.3 percent rise topped economists' forecasts for a gain of 5.6 percent, though it was not enough to completely offset the 19.9 percent decline seen in November.
(10 a.m. ET) U.S. Federal Reserve Labor Market Conditions Index. It is forecast to rise in January by 2.9 points from December.
KEY CORPORATE NEWS
Tahoe Resources Inc. has agreed to acquire Lake Shore Gold. All of the Lake Shore Gold issued and outstanding common shares will be exchanged on the basis of 0.1467 of a Tahoe common share per each Lake Shore Gold common share. Upon completion of the transaction, existing Tahoe and Lake Shore Gold shareholders will own approximately 74 per cent and 26 per cent of the pro forma company, respectively.
Uranium producer Cameco Corp. late Friday reported a quarterly loss, hurt by a higher impairment charge and weakness in the Canadian dollar. The company reported a fourth-quarter net loss of 3 cents per share. Cameco had a profit of 18 Canadian cents per share in the year-earlier quarter. Excluding items, the company earned 38 Canadian cents per share. The results were below expectations and Cameco also guided 2016 revenues down 5 per cent.
Diamond Offshore Drilling Inc, one of the world's top five offshore rig contractors, reported a better-than-expected quarterly profit as cost cutting pays off, and the company said it was suspending its dividend to add to cost savings. The dividend suspension comes after the company scrapped a special dividend of 75 cents last February.
Earnings today include: Alacer Gold Corp.; Alere Inc.; Credicorp Ltd.; Hasbro Inc.; Loews Corp.; Plains All American Pipeline LP; Twenty-First Century Fox Inc.; Waste Connections Inc.; Yelp Inc.
Also see: Monday's small-cap stocks to watch
ANALYST ACTIONS
Desjardins Securities upgraded Stella-Jones to "buy" from "hold" and raised its price target to $51 (Canadian) from $48.
With files from wire services