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.
North American index futures are holding steady, digesting Tuesday's declines that saw the Dow Jones industrial average fall by 180 points. Stronger economic data from the U.S. lately and hawkish Federal Open Market Committee member comments have increased speculation that the Fed could be preparing to raise interest rates as soon as June, and that two to three hikes are still possible this year.
This morning, Lowes posted strong results, echoing those of Home Depot earlier this week, confirming the big increase in April retail sales reported last Friday.
Traders are now waiting for this afternoon's FOMC minutes to see if another shoe will drop. Minutes from the March meeting indicated Fed members discussed what they may do in April, so traders may look at the April minutes to see if the Fed discussed taking any actions in June or July.
The prospect of a June rate hike has weighed more on stocks than bonds this week, markets where participants were expecting rate hikes to be pushed off to late 2016 or even next year, despite warnings from Fed members that they were being too pessimistic. The U.S. dollar index - a measure of the value of the greenback relative to a basket of foreign currencies, is up slightly today but essentially continues to hang around 95.00. Expectations of two 2016 rate hikes have been priced in by currency traders.
European markets are mixed today. Italy and Spain are trading up slightly on indications that the European Union may give them some flexibility on budget and debt requirements, while the U.K. and Germany are down marginally. An Ipsos Brexit poll came out this morning showing the "Remain" side is leading 55 per cent to 37 per cent. This poll has sparked a pop in the British pound, but no significant action in the FTSE. The Ipsos result is an extreme outlier relative to several other published polls and the timing appears dodgy, coming so quickly after Tuesday's TNS poll showed the Leave camp taking the lead for the first time in months. The sterling rally has already started to level off and today's poll could be discounted as spurious by the markets over the course of the day.
Crude oil is trading slightly lower this morning but still well above where it started the week and with Brent within striking distance of $50.00. American Petroleum Institute inventories fell less than expected but fell all the same. We could see more action in oil through the day, especially around the Department of Energy inventory reports due mid-morning, or on any supply news related to the wildfires in Canada or the terrorism in Nigeria.
Now, here is a closer look at what's going on this morning and what is still to come.
MARKET DATA:
Futures (as of approx. 715 am ET)
Dow -0.01 per cent; S&P 500 +0.02 per cent; Nasdaq: +0.02 per cent; TSX 60 -0.26 per cent
Equities
Japan's Nikkei -0.05 per cent
Shanghai composite index -1.28 per cent
Hong Kong's Hang Seng -1.45 per cent
Germany's DAX -0.04 per cent
London's FTSE -0.34 per cent
France's CAC 40 -0.14 per cent
Commodities
WTI crude oil (Nymex June) +0.50 per cent at $48.55 (U.S.) a barrel
Gold (Comex June) -0.10 per cent at $1,275.60 (U.S.) an ounce
Copper (Comex July) -1.46 per cent at $2.05 (U.S.) a pound
Currencies
Canadian dollar -0.31 at 77.17 cents (U.S.)
U.S. dollar index +0.192 at 94.740
Bonds
Canada 10-year bond yield +0.004 at 1.317 per cent
KEY ECONOMIC RELEASES
(10:30 a.m. ET) EIA petroleum status report
(2 p.m. ET) Federal Open Market Committee (FOMC) minutes from April 26-27 meeting released
KEY STOCKS TO WATCH
Home improvement chain Lowe's Cos Inc followed larger rival Home Depot Inc in reporting better-than-expected quarterly sales as strength in the housing market and favorable weather led to strong demand for building and home renovation products. Shares of the company, which also raised its profit forecast for the year ending January 2017, were up almost 3 percent in premarket trading. Sales at stores open more than 13 months rose 7.3 per cent, well above the 4.3 per cent growth expected by analysts polled by research firm Consensus Metrix. Excluding items, the company earned 87 cents per share, beating the average analyst estimate of 85 cents, according to Thomson Reuters I/B/E/S.
Target Corp on Wednesday reported a lower-than-expected increase in sales at established stores as consumers spent more on big-ticket purchases like homes and cars than on discretionary items like apparel, a major source of revenue for department stores. The Minneapolis-based company's shares dropped 7.4 per cent to $68.15 in premarket trading. Target said sales at stores open at least a year rose 1.2 percent in the first quarter ended on April 30, missing market expectations for a 1.6 percent increase, according to research firm Consensus Metrix. Net sales fell 5.4 percent to $16.2 billion, mainly due to the sale of the pharmacy and clinic business to CVS Health Corp . Analysts on average had forecast $16.32 billion, according to Thomson Reuters I/B/E/S.
Shares of Staples were up 1.5 per cent at $8.40 in premarket trading after the company reported higher-than-expected quarterly sales.
Other earnings today include: American Eagle Outfitters Inc.; Cisco Systems Inc.; Hormel Foods Corp.; L Brands Inc.; Progressive Corp.; SABMiller PLC; Take-Two Interactive Software Inc.; Urban Outfitters Inc.; Williams-Sonoma Inc.
Also see: Wednesday's small-cap stocks to watch
With files from wire services