Crude’s remarkable rebound this year has put the Toronto Stock Exchange on the cusp of hitting 14,000. The composite index closed yesterday at its highest level in six months. It’s a rally that’s been fuelled in no small part by oil’s 70 percent surge since its February low. And now Canada’s benchmark stock exchange is sitting on the brink of a threshold it hasn’t seen since last August.
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 will return.
U.S. and Canadian stock-index futures were slightly higher ahead of the opening bell, with investors assessing gains as the S&P 500 Index hovers near a record.
S&P 500 future contracts expiring in September rose 0.1 percent to 2,177.5 at 7:25 a.m. in New York. Stocks fluctuated Monday after a late-week rally pushed the index to a record and left equities valuations at a seven-year high. Dow Jones Industrial Average futures gained 19 points, or 0.1 percent, to 18,479. Futures for the TSX 60 were up 0.2 per cent.
"The market had a good run during the reporting season, so a little pause is probably the right thing," said Christian Zogg, head of equity and fixed income at LLB Asset Management in Vaduz, Liechtenstein. "The U.S. market is not exactly cheap and with the renewed discussion after the good labor market data for a further step in the fed fund rates later in the year, the market could slip a bit, but not today."
Confidence in the U.S. economy has grown after Friday's payroll data beat estimates. While traders brought forward the first month with at least even odds of a Federal Reserve rate increase to February from September before the jobs data, they still expect the move will be gradual.
The S&P 500 has rallied 19 percent since reaching a 22-month low in February, while a measure of volatility posted its longest stretch of weekly declines in almost eight years. The benchmark's price-earnings ratio last month climbed above 20 for the first time since 2009.
Investors will look today to data on June wholesale inventories for indications of the strength of the world's biggest economy and the likely trajectory of interest rates. Earnings will also be in focus, with Walt Disney Co. and SolarCity Corp. among companies scheduled to report.
With almost 90 percent of S&P 500 members having posted results, about 77 percent have beaten profit predictions and 56 percent have topped sales projections. Analysts have tempered their estimates for second-quarter net income to a 2.7 percent decline, from a 5.8 percent drop less than a month ago.
Among companies moving in early New York trading, Valeant Pharmaceuticals International Inc. advanced 7 percent as it reaffirmed its 2016 profit guidance, even as it reported lower-than-estimated second-quarter sales and earnings. That should help give the TSX a little extra boost.
Here's a closer look at what's going on this morning:
MARKET DATA: (as of about 830 a.m. ET)
Futures
Dow +0.12 per cent; S&P 500 +0.11 per cent; Nasdaq: +0.15 per cent; TSX 60: +0.27 per cent
Equities
Japan's Nikkei +0.69 per cent
Shanghai composite index +0.72 per cent
Hong Kong's Hang Seng -0.13 per cent
Germany's DAX +0.78 per cent
London's FTSE +0.29 per cent
France's CAC 40 +0.62 per cent
Commodities
WTI crude oil (Nymex Sep) +0.58 per cent at $43.27 (U.S.) a barrel
Gold (Comex Dec) -0.13 per cent at $1,339.50 (U.S.) an ounce
Copper (Comex Sep) -0.37 per cent at $2.157 (U.S.) a pound
Currencies
Canadian dollar +0.05 at 76.03 cents (U.S.)
U.S. dollar index -0.031 at 96.370
Bonds
Canada 10-year bond yield -0.013 at 1.051 per cent
KEY ECONOMIC RELEASES
U.S. nonfarm productivity unexpectedly fell in the second quarter, pointing to sustained weakness that could raise concerns about corporate profits and companies' ability to maintain their recent robust pace of hiring. The Labor Department said on Tuesday that productivity, which measures hourly output per worker, dropped at a 0.5 percent annual rate in the April-June period. It was the third consecutive quarterly decline. Productivity fell at an unrevised 0.6 percent rate in the first quarter. Economists polled by Reuters had forecast productivity rising at a 0.4 percent rate in the second quarter.
Canadian housing starts fell in July from June, as construction of multiple units - typically condos - fell 13.3 percent after an unexpectedly large gain in June, data from the national housing agency showed on Tuesday. The report from the Canadian Mortgage and Housing Corp showed the seasonally adjusted annualized rate of housing starts declined to 198,395 in July, down from a revised 218,326 in June. Economists had forecast 195,000 starts in July.
Still to come:
(10 a.m. ET) U.S. wholesale trade for June. The Street is expecting an unchanged reading.
KEY STOCKS TO WATCH
Valeant rose 7 per cent in the U.S. premarket after the company maintained its full-year forecast and announced strategic changes to its business. The company said second-quarter revenue fell to $2.42 billion from $2.73 billion a year earlier. Analysts on average had expected revenue of $2.46 billion, according to Thomson Reuters I/B/E/S. Excluding items, Valeant earned $1.40 per share, missing analysts' average estimate of $1.48.
Iamgold shares are down 8 per cent this morning after the company announced a $200-million bought deal financing at a price of $5.15 a share.
Calgary-based Inter Pipeline Ltd. says it will spend $1.35 billion to buy the Canadian oil and gas assets of the Williams pipeline companies.
SolarCity, the target of an acquisition by Tesla , was down 3.4 per cent at $23.50. The company is scheduled to report results after markets close.
Luxury handmaker Coach said that excluding items, it earned 45 cents per share, topping the average analyst estimate of 41 cents.
Other earnings today include: Alterra Power Corp.; Aurinia Pharmaceuticals Inc.; Cardiome Pharma Corp.; Chinook Energy Inc.; Ensign Energy Services Inc.; Essential Energy Services Ltd.; Exchange Income Corp.; Jazz Pharmaceuticals PLC; Keyera Corp.; Klondex Mines Ltd.; Magellan Aerospace Corp.; Norwegian Cruise Line Holdings Ltd.; Nuvista Energy Ltd.; Pizza Pizza Royalty Corp.; Polaris Materials Corp.; Premium Brands Holdings Corp.; SolarCity Corp.; Strad Energy Services Ltd.; Stuart Olson Inc.; Superior Plus Corp.; Tahoe Resources Inc.; TerraVest Capital Inc.; Titan Medical Inc.; TORC Oil & Gas Ltd.; TransAlta Corp.; Valeant Pharmaceuticals International Inc.; Walt Disney Co.; Westport Fuel Systems Inc.; Yangarra Resources Ltd.
Also see: Tuesday's small-cap stocks to watch
With files from Bloomberg and other wire services