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.
March is off to a strong start for stock markets around the world. U.S. index futures are up 0.4 per cent to 0.5 per cent with the Nasdaq leading the charge. The TSX 60 is up 0.65 per cent. Overseas markets have been even stronger with the Nikkei and Dax both up 1.4 per cent and the FTSE up 1.0 per cent.
U.S. President Donald Trump's speech to Congress was well received by the markets. His tone was more positive and forward, announcing plans for a trillion dollar infrastructure plan using public and private money. He also committed to increased defence spending, health care and tax reform and other initiatives. He kept the sabre rattling to a minimum and spoke positively about the points-based immigration systems in Canada and Australia.
The devil, as always, is in the details. With big promises made, the focus now shifts to getting all of these initiatives passed through Congress, funded and implemented. In other words, the real work starts now. In the coming days and weeks, the process of figuring out what to spend where and when begins, and we'll start to figure out what can be done this year and what could get pushed off to future years. Eventually, the market will need details for forecasting. It remains to be seen how long traders' patience will last, but for now, the trend remains upward until it breaks.
It remains to be seen how long traders' patience will last but for now the trend remains upward until it breaks. Traders should note that new highs in the Dow and S&P are not being confirmed by the Nasdaq or Russell 2000, suggesting that the rally may be dwindling to a smaller number of large cap stocks, a sign of potential exhaustion.
Currency markets have also been active overnight. The U.S. dollar is up on a combination of speech reaction and comments pointing toward a potential March rate hike from New York Federal Reserve President William Dudley, one of the Big 3 Federal Open Market Committee members, and San Francisco Federal Reserve President John Williams. St Louis Federal Reserve President James Bullard, meanwhile, talked about wanting to start running down the Fed's balance sheet.
The U.S. dollar soared in particular against the Japanese yen and gold with the euro and British pound also taking hits. Sterling is having a mixed day, down against the U.S. dollar, steady against the euro and up against the yen amid talk the House of Lords could amend the Brexit bill and a soft U.K. manufacturing PMI report.
The Canadian dollar fell only marginally against the U.S. dollar overnight but had already taken a big hit during the day yesterday ahead of the Trump and Fed speeches. The loonie could be active around today's Bank of Canada decision. While the Canadian economy has been doing well, comments at the last meeting from Governor Stephen Poloz about being ready to cut interest rates if U.S. actions on trade sideswipe Canada were seen as a dovish surprise.
Since the last Bank of Canada meeting, Prime Minister Justin Trudeau, External Affairs Minister Chrystia Freeland and Finance Minister Bill Morneau have all been to Washington to meet with their counterparts in the new administration. It will be interesting to see if Governor Poloz changes his tune in light of these meetings and the lower loonie.
Crude oil may also attract some attention today. West Texas Intermediate is trading up slightly despite a 2.5 million barrel (mmbbl) increase in American Petroleum Institute inventories. Today, Department of Energy inventories are due mid-morning.
Amid all the hoopla of the big speeches, there has been a ton of other data that could influence trading. Chinese manufacturing PMI reports were better than expected with reports for the U.S. and Canada due mid-morning. U.S. construction spending and the Beige Book are also due. Earnings reports for Lowes in the U.S. and National Bank in Canada were both well above expectations. Reports this week and next may be viewed through the lens of whether they increase or decrease the chances of a March Fed rate hike.
Speeches from Federal Reserve Chair Janet Yellen and Vice-Chair Stanley Fischer Friday may attract particular attention. Comments this week from Fed Governor Lael Brainard could also be of interest. She was particularly close to the Obama administration, so it will be interesting to see if she is still as dovish and if her opinions still carry as much weight with the Street as they did before or if she is getting marginalized as the Fed turns more hawkish.
Now, here is a closer look at key market data, and corporate and economic news.
MARKET DATA:
Futures (as of about 8:40 a.m. ET)
Dow +0.74 per cent; S&P 500 +0.72 per cent; Nasdaq: +0.65 per cent; TSX 60 +0.71 per cent
Equities
Japan's Nikkei +1.44 per cent
Shanghai composite index +0.15 per cent
Hong Kong's Hang Seng +0.15 per cent
Germany's DAX +1.37 per cent
London's FTSE +1.09 per cent
France's CAC 40 +1.58 per cent
Commodities
WTI crude oil (Nymex April) +0.24 per cent at $54.14. (U.S.) a barrel
Gold (Comex April) -0.94 per cent at $1,242.10 (U.S.) an ounce
Copper (Comex May) +0.03 per cent at $2.74 (U.S.) a pound
Currencies
Canadian dollar -0.06 at 75.02 cents (U.S.)
U.S. dollar index +0.75 at 101.86
Bonds
Canada 10-year bond yield -0.40 at 1.68 per cent
KEY ECONOMIC RELEASES
Japan capital spending and manufacturing purchasing managers' index (PMI)
China PMI
Euro Area manufacturing PMI
Germany unemployment and CPI
U.K. manufacturing PMI
(8:30 a.m. ET) Canada current account balance for Q4. Estimate is $9.8-billion ($39-billion annualized rate).
Canada's current account deficit narrowed sharply to C$10.73 billion ($8.07 billion) in the fourth quarter as the balance on international trade in goods posted its first surplus in more than two years, Statistics Canada said on Wednesday.
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(8:30 a.m. ET) U.S. personal spending and personal income for January. Consensus is increases of 0.3 per cent from December for both.
U.S. consumer spending rose at a sluggish pace in January, despite signs of growing optimism about the economy. The Commerce Department says consumer spending increased 0.2 per cent in January, after a 0.5 per cent gain in December. Spending on services — from haircuts to health care — was flat, and Americans spent less on long-lasting goods such as autos and appliances. Prices also rose in a sign that inflation has perked up a bit. A measure of inflation closely watched by the Federal Reserve rose 0.4 per cent in January and has increased 1.9 per cent in the past 12 months, the biggest year-over-year gain in more than four years. That nearly matches the Fed's target of 2 per cent and may make a rate hike by the Fed more likely this year.
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(8:30 a.m. ET) U.S. Core PCE Price Index for January. Consensus is an increase of 0.3 per cent from December and up 1.8 per cent year over year.
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(9:30 a.m. ET) Canada Markit manufacturing PMI for February.
(9:45 a.m. ET) U.S. Markit manufacturing PMI for February.
(10 a.m. ET) U.S. manufacturing ISM for February. Consensus is 56.0, unchanged from January.
(10 a.m. ET) U.S. construction spending for January. Consensus is an increase of 0.6 per cent from December.
(10 a.m. ET) Bank of Canada policy announcement.
(10:30 a.m. ET) EIA petroleum status report
(2 p.m. ET) U.S. Beige Book released
Also: Canada auto sales for February and U.S. Ward's total vehicle sales for February.
KEY STOCKS TO WATCH
Also see: Wednesday's small-cap stocks to watch
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National Bank of Canada reported a better-than-expected quarterly profit on Wednesday, largely boosted by its wealth management and personal and commercial businesses. Canada's sixth-largest bank said net income in its personal banking and commercial business rose 18.3 per cent to $213-million, helped by higher personal mortgage lending. Net income in its wealth management business rose to $101-million in the first quarter ended Jan. 31 from $77-million. Excluding certain items, the bank earned $1.35 per share, handily beating the average analysts' estimate of $1.26, according to Thomson Reuters I/B/E/S.
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Torstar Corp., the owner of one of Canada's largest circulation daily newspapers, reported a lower-than-expected quarterly revenue, as a decline in print advertising more than offset growth in its digital businesses. Print advertising revenue fell 13 per cent in the fourth quarter ended Dec. 31, while revenue in its digital ventures climbed 5.5 per cent. Revenue dropped a bigger-than-expected 12 per cent to $188.4-million. Analysts' on average had expected revenue of $210.3-million, according to Thomson Reuters I/B/E/S.
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Canada Goose Holdings Inc., known for its trademark $900 parkas with coyote fur-lined hoods, is seeking to raise as much as $320-million in its initial public offering. The Toronto-based retailer and its backers, which plan to list shares both in the company's home city and in New York, are offering 20 million shares for $14 to $16 each, according to a filing Wednesday. At the top end of that range, Canada Goose would be valued at about $1.7-billion.
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Best Buy Co Inc., the No. 1 U.S. electronics retailer, reported an unexpected decline in holiday-quarter same-store sales on Wednesday, hurt by weak demand for tablets, gaming consoles, wearable devices and mobile phones. Shares of the retailer, which also forecast a 1-2 percent decline in current-quarter same-store sales, slumped 2.7 per cent in premarket trading.
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Diagnostic company Alere Inc. said on Wednesday it would delay filing its 2016 annual report and that it has not yet fixed a material weaknesses with respect to its revenue recognition practices disclosed in its 2015 annual report.
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Lowe's jumped 5.7 percent to $78.58 after the home improvement chain issued an upbeat sales forecast for the year.
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Dollar Tree Inc., the biggest U.S. dollar-store chain, reported better-than-expected quarterly profit and sales on Wednesday, helped by lower costs and higher customer spending in its stores. Shares of the retailer, which also owns the Family Dollar chain, rose 5 percent to $80.05 in premarket trading.
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Cybersecurity firm Palo Alto Networks tumbled 20 percent to $122 as its current-quarter revenue and profit forecast missed analysts' estimates.
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Goldman Sachs upgraded chipmaker Micron Technology shares to "buy" from "neutral," saying the company will benefit from increases in memory chip pricing, among other factors. It shares were up 2.4 per cent in premarket trading.
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Salesforce.com Inc. raised its revenue forecast for its full fiscal year to slightly above analysts expectations but lowered its outlook for its next quarter to a lower-than-expected profit, sending its shares down 1.5 per cent in premarket trading Wednesday. The company said it expects first-quarter adjusted profit of 25 cents to 26 cents per share. Analysts were expecting a profit of 30 cents per share, according to Thomson Reuters I/B/E/S.
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Bernstein downgraded chip maker Intel shares to "underperform" from "market perform." Its shares fell 1 percent in premarket trading.
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Earnings include: Best Buy Co Inc.; Black Diamond Group Ltd.; Canadian Western Bank; Crew Energy Inc.; Dollar Tree Inc.; Evertz Technologies Ltd.; Freehold Royalties Ltd.; Gran Tierra Energy Inc.;Horizon North Logistics Inc.; Labrador Iron Ore Royalty Corp.; Lowe's Companies Inc.; Monster Beverage Corp.; Mylan NV; National Bank of Canada; NeuLion Inc.; Office Depot Inc.; Secure Energy Services Inc.; TORC Oil & Gas Ltd.; Trinidad Drilling Ltd.; WSP Global Inc.
With files from wire services