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.
Over the course of January, traders have increasingly come to recognize that the post-election honeymoon rally had priced U.S. President Donald Trump to perfection. In other words, the market was anticipating that all of his policies would be good for the U.S. economy and quickly and efficiently implemented without disruption, opposition or retribution.
Stock markets around the world are dropping to start the week as traders who should have known better finally have figured out that sweeping policy changes can also cause widespread confusion, disruption, and uncertainty. U.S. index futures are down 0.25 per cent or more, while the FTSE are Dax are both off 0.7 per cent. Most Asia Pacific markets were closed for Lunar New Year holidays.
Currency markets are mixed to start the week, with the U.S. dollar is up slightly against most other major currencies and gold. The Japanese yen is the top performer ahead of this week's Bank of Japan meeting. Commodity trading is also mixed with WTI crude oil up 0.17 per cent and copper down 0.35 per cent.
The big question haunting markets today is whether the chaos over temporary changes to U.S. immigration policy could be a prelude to the potential bigger disruptions from changes to trade relationships and tariffs. In the 2000-2002 bear market, the last leg down started to the day when then-President George W. Bush slapped an import duty on Chinese steel in a bid to block dumping.
Today is relatively quiet for news but this is just a quick pause with big announcements coming this week including central bank meetings in the U.S., U.K. and Japan, manufacturing and service PMI reports, plus ADP and nonfarm payrolls.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures (as of about 7:30 a.m. ET)
Dow -0.22 per cent; S&P 500 -0.25 per cent; Nasdaq: -0.29 per cent; TSX 60 -0.10 per cent
Equities
Japan's Nikkei -0.51 per cent
Shanghai composite index closed for holiday
Hong Kong's Hang Seng closed for holiday
Germany's DAX -0.70 per cent
London's FTSE -0.70 per cent
France's CAC 40 -0.79 per cent
Commodities
WTI crude oil (Nymex March) +0.17 per cent at $53.26. (U.S.) a barrel
Gold (Comex April) +0.08 per cent at $1,192.00 (U.S.) an ounce
Copper (Comex March) -0.35 per cent at $2.68 (U.S.) a pound
Currencies
Canadian dollar -0.01 at 76.01 cents (U.S.)
U.S. dollar index +0.01 at 101.19
Bonds
Canada 10-year bond yield +0.01 at 1.77 per cent
KEY ECONOMIC RELEASES
Japan retail sales and Bank of Japan decision and outlook report
Euro Area economic confidence, consumer confidence and consumer price index
China markets closed
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(8:30 a.m. ET) U.S. personal spending and income for December. The consensus projections are increases of 0.4 per cent for both from November.
U.S. consumer spending rose solidly in December as households bought motor vehicles and a range of services amid rising wages, pointing to sustained domestic demand that is likely to set the economy up for faster growth in early 2017. The Commerce Department said on Monday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.5 percent after an unrevised 0.2 percent gain in November. Economists polled by Reuters had forecast consumer spending climbing 0.5 percent last month. Consumer spending increased 3.8 percent in 2016 after rising 3.5 percent in 2015.
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(8:30 a.m. ET) U.S. core PCE price index for December. Consensus is an increase of 0.1 per cent from November and 1.7 per cent year over year.
(10 a.m. ET) U.S. pending home sales for December. Consensus is a rise of 1.5 per cent from the previous month.
(10:30 a.m. ET) U.S. Dallas Fed manufacturing activity for January.
KEY STOCKS TO WATCH
Also see: Monday's small-cap stocks to watch
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Saputo Inc. is moving to buy out the minority shareholders of Warrnambool Cheese and Butter Factory Co., an Australian cheese and dairy producer that it acquired in 2014. As of the announcement Monday, Saputo owned 88.02 of Warrnambool's shares.
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Keysight Technologies Inc., a provider of software and equipment to the electronics industry, said it would buy U.S. data technology company Ixia for about $1.6-billion, net of cash. Ixia shares were up 6 per cent in premarket trading.
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Tempur Sealy dropped 22.2 percent to $49.15 after the company said it terminated its contracts with mattress retailer Mattress Firm following disagreements over changes in their contracts.
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Citigroup Inc. said on Monday it would speed up the transformation of its U.S. mortgage business by exiting servicing operations by the end of 2018. Its shares were down 0.63 per cent in premarket trading.
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Walt Disney was upgraded to "overweight" from "equal-weight" at Morgan Stanley, which also raised the price target to $124 per share from $101. Morgan Stanley thinks ESPN has the potential to accelerate revenue growth. Its shares were up 0.43 per cent in premarket trading.
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Keefe, Bruyette, & Woods upgraded American Express to "outperform" from "market perform," citing improved fundamentals. Its shares were down 0.07 per cent in premarket trading.
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Earnings include: Affiliated Managers Group Inc.; Alarmforce Industries Inc.; General Growth Properties Inc.; IDEX Corp.; Packaging Corp of America.; Principal Financial Group Inc.; Reinsurance Group of America Inc.; Teranga Gold Corp.; UDR Inc.
With files from wire services