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.
After defying gravity last week, crude oil continues to fall back to Earth Tuesday morning with West Texas Intermediate and Brent both falling 1.1 per cent. Oil's tumble appears to be mainly due to a lack of new reasons to keep the party going, combined with a seasonally quieter period for trading. The crude correction has been weighing on the Canadian dollar for a second straight day and could act as an anchor on energy stocks as well.
Canadian banks could dominate the spotlight with earnings season kicking off on a positive note as Bank of Montreal reported adjusted earnings per share of $1.94 -- way above the $1.81 Street estimate. Growth was driven by U.S. personal and commercial banking, which was up nearly 25 per cent over year, and by Capital Markets. Canadian personal and commercial banking earnings only rose by 1 per cent due to an increase in credit loss provisions which rose to $257-million from $160-million in the same quarter last year. This suggests the Alberta Wildfires, plus the struggling oil patch and exposure to hot and cold real estate markets in different parts of the country could impact results from other Canadian banks as well.
Overall, world markets continue to trend sideways with traders waiting on U.S. Federal Reserve Chair Janet Yellen's speech this Friday in Jackson Hole, Wyoming to give more clues on whether the Fed is looking to raise interest rates in September or December. U.S. index futures are up 0.25 per cent after finishing flat on Monday. The Dax is up 0.7 per cent and the FTSE is up 0.6 per cent. Flash manufacturing and service reports for France and Germany were mixed, but traders appear to be responding favourably to comments out of Monday's summit of German, Italian and French leaders indicating the EU plans to go on after Britain leaves, easing fears Brexit could lead to more turmoil on the continent.
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. 7:15 a.m. ET)
Dow +0.24 per cent; S&P 500 +0.23 per cent; Nasdaq: +0.27 per cent; TSX 60 +0.14 per cent
Equities
Japan's Nikkei -0.05 per cent
Shanghai composite index +0.19 per cent
Hong Kong's Hang Seng 0.00 per cent
Germany's DAX +0.65 per cent
London's FTSE +0.44 per cent
France's CAC 40 +0.61 per cent
Commodities
WTI crude oil (Nymex Sept.) -0.76 per cent at $47.06 (U.S.) a barrel
Gold (Comex Dec.) +0.02 per cent at $1,343.60 (U.S.) an ounce
Copper (Comex Dec.) -0.37 per cent at $2.14 (U.S.) a pound
Currencies
Canadian dollar +0.30 at 77.54 cents (U.S.)
U.S. dollar index -0.15 at 94.36
Bonds
Canada 10-year bond yield +1.41 at 1.03 per cent
KEY ECONOMIC RELEASES
The Euro region releases its manufacturing, services and composite PMI data for July and reports on its July consumer confidence.
(9:45 a.m. ET) U.S. releases its Markit Manufacturing PMI for August.
(10 a.m. ET) reported new home sales for July. Estimates are for a 1.7 per cent decline to 582,000 annual rate.
(10 a.m. ET) The U.S. reports the Richmond Fed Manufacturing Index.
KEY STOCKS TO WATCH
Bank of Montreal, Canada's fourth-biggest bank, on Tuesday reported a 3 per cent increase in third-quarter earnings, benefiting from strong performances from its retail banking and capital markets businesses. The bank reported earnings per share of $1.86 for the quarter to July 31. Analysts on average were expecting earnings of $1.81 per share, according to Thomson Reuters I/B/E/S. Net income for the period ended July 31 climbed to $1.25-billion, $1.19-billion, a year earlier.
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Best Buy Co. Inc. reported a much higher-than-expected quarterly profit on strength in health and wearable items like smartwatches, and the largest U.S. electronics retailer raised its earnings outlook, sending its shares up more than 16 per cent. The company said it now expected low-single-digit percentage growth in fiscal-year operating income, compared with a previous forecast of "approximately flat" results.
"We continue to expect the slight revenue decline in the first half to be offset by slight growth in the back half," Chief Financial Officer Corie Barry said in a statement.
Excluding special items, the company earned 57 cents per share in the second quarter ended on July 30. Analysts on average had expected 43 cents, according to Thomson Reuters I/B/E/S. Sales at established stores rose 0.8 per cent. Analysts had expected a 0.60 per cent fall, according to research firm Consensus Metrix.
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J.M. Smucker fell 3.5 per cent to $150.80 after the processed foods maker posted lower-than-expected quarterly sales.
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Monsanto rose 4.2 per cent on a Bloomberg report that the U.S. seeds company's merger talks with German suitor Bayer AG were advancing toward a deal.
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Zoe's Kitchen dropped 14 per cent to $32.05 after the restaurant chain operator's second-quarter revenue missed analysts' expectations.
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Toll Brothers Inc. reported a rise in revenue for the fourth straight quarter, beating analysts' estimates, as it sold more luxury homes at higher prices, suggesting a steady growth in the U.S. housing market. Orders, a key metric of future revenue for homebuilders, rose 18.2 per cent to 1,748 units in the third quarter, its highest growth in two years.
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Earnings include: Bank of Montreal; Best Buy Co Inc.; Dycom Industries Inc.; Intuit Inc.; J M Smucker Co.; La-Z-Boy Inc.; Toll Brothers Inc.;
With files from wire services