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.
Markets in Europe and North America have been trading in the red again this morning, and losses have accelerated as the opening bell approaches. London's FTSE and Germany's DAX are down 1.3 per cent to 1.8 per cent, with futures for the S&P 500 and Dow both down about 0.8 per cent. So far, the bears don't appear to be done and are gearing up for another push downward.
In Asian markets, the Nikkei took a 5 per cent plunge, due mostly to a rising yen. Crude oil, meanwhile, is fairly flat despite comments from the International Energy Agency that the oversupply in the market is worse than it previously expected. I think this is a case of officialdom catching up with the market; recent pressure on oil prices has clearly already priced in oversupply expectations. Meanwhile, reports out overnight of brokers suggesting oil could fall under $20 (U.S.) confirms the depth of the negative sentiment out there. Amid these conditions, the front-month contract for West Texas intermediate peeked above $30.00. Although it wasn't able to hold above it yet, it has been holding $29.50, the midpoint of a $26.50 to $32.50 trading range that has been emerging.
Action so far this morning suggests that some of the selling pressure is starting to ease, but at the same time, shell-shocked bulls appear to be reluctant to step in. Because of this, we could have an "inside day" in many markets - when the entire daily price range for a given security falls within the price range of the previous day.
The Nasdaq 100 remains in focus, having successfully retested support at 3,900 Monday, potentially completing a double bottom on the charts and suggesting that while individual stocks remain vulnerable (Tesla was hammered Monday even before Wednesday's earnings), the broader sector may be getting washed out. Action in bellweather Apple (which actually went up Monday) may indicate if this is the case or not.
Currency trading so far today reflects current indecision. Some capital is clearly still going defensive with gold consolidating Monday's rally just below $1,200 (U.S.) per ounce. At the same time, resource currencies like the Canadian dollar and Australian dollar are bouncing back, suggesting some short covering and bargain starting in risk markets.
The U.S. dollar is sliding slightly in the absence of any news while the euro is up slightly despite more dovish talk out of the European Central Bank. This suggests traders are expecting Fed Chair Janet Yellen to continue the recent shift in Fedspeak back to the dovish side at her testimony to Congress Wednesday.
Canadian utility Fortis Inc announced this morning it would buy U.S. power transmission company ITC Holdings Corp for $6.9 billion. Otherwise, it's relatively quiet for North American news with little economic data scheduled, although things will pick up again late today with API oil inventories, Disney earnings and New Hampshire presidential primary results.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures
S&P 500 -0.8 per cent; Dow -0.8 per cent; Nasdaq: -0.8 per cent; TSX 60 -0.6 per cent
Equities
Hong Kong's Hang Seng Closed for holiday
Shanghai composite index Closed for holiday
Japan's Nikkei 225 -5.41 per cent
London's FTSE -1.32 per cent
Germany's DAX -1.83 per cent
France's CAC 40 -2.64 per cent
Commodities
WTI crude oil (Nymex March) -0.14 per cent at $29.66 (U.S.) a barrel
Gold (Comex April) -0.56 per cent at $1,191.20 (U.S.) an ounce
Copper (Comex March) -1.91 per cent at $2.05 (U.S.) a pound
Currencies
Canadian dollar +0.0010 at 71.87 cents (U.S.)
U.S. dollar index -0.059 at 96.511
Bonds
U.S. 10-year Treasury yield +0.01 at 1.76 per cent
KEY ECONOMIC RELEASES
(10 a.m. ET) U.S. wholesale inventories for December. Consensus is for a fall of 0.1 per cent.
(10 a.m. ET) U.S. job openings & labor turnover survey for December (JOLTs).
KEY CORPORATE NEWS
Canadian utility Fortis Inc said it would buy U.S. power transmission company ITC Holdings Corp for $6.9 billion - its biggest deal ever - to boost its exposure to regulated power markets, which have stable power prices. ITC shareholders will get $45 per share - $22.57 in cash and 0.7520 Fortis shares for each share they hold - a 14 percent premium to the stock's closing price on Monday.
Agrium reported fourth-quarter EPS of $1.52 (U.S.) vs. a Street estimated $1.38.
Coca-Cola Co., the world's largest soft- drink company, posted fourth-quarter profit that beat analysts' estimates after Chief Executive Officer Muhtar Kent's $3 billion cost-cutting program helped improve margins. Earnings were 38 cents a share in the period, excluding some items, the Atlanta-based company said in a statement Tuesday. Analysts estimated 37 cents on average. Coca-Cola also said it would refranchise all its North America bottling operations, including its 39 cold-fill production factories, three years earlier than expected, as the soda maker looks to cut costs.
Sears Holdings Corp. estimated quarterly sales below analysts' expectations, citing unseasonably warm weather and intense competition, and said it would speed up closure of at least 50 unprofitable stores in the next few months. The struggling retailer's shares fell 3.4 percent to $16.16 in light premarket trading on Tuesday.
CVS Health Corp. on Tuesday reported fourth-quarter earnings of $1.5 billion. The Woonsocket, Rhode Island-based company said it had profit of $1.34 per share. Earnings, adjusted for non-recurring costs and to account for discontinued operations, came to $1.53 per share. The results met Wall Street expectations.
Other earnings today include: AGL Resources Inc.; Agrium Inc.; ARC Resources Ltd.; CDW Corp.; Centene Corp.; Cineplex Inc.; Coca-Cola Co.; Computer Modelling Group Ltd.; CVS Health Corp.; First Data Corp.; Goodyear Tire & Rubber Co.; Ingersoll-Rand PLC; Open Text Corp.; Regeneron Pharmaceuticals Inc.; Rogers Sugar Inc.; Toromont Industries Ltd.; Tucows Inc.; Walt Disney Co.; Western Union Co.; Wyndham Worldwide Corp.
With files from wire services