Jennifer Dowty
Jennifer Dowty, Chartered Financial Analyst, writes exclusively for Globe Unlimited subscribers. The Before the Bell report is updated throughout the premarket to reflect latest developments.
Good Thursday morning to you. Welcome to this first trading day of the second half of 2015.
North American futures are modestly positive, extending slight gains from earlier this morning on a weaker-than-expected U.S. nonfarm payrolls report. S&P 500 futures are up about 0.3 per cent.
The U.S. Bureau of Labor Statistics' June non-farm payroll data showed the creation of a net 223,000 jobs last month. Average hourly earnings were unchanged. Also noteworthy were the downward revisions. The April number was revised down to 187,000 from 221,000 , and the May number was revised down to 254,000 from 280,000. The unemployment rate ticked down to 5.3 per cent from 5.5 per cent.
The jobs news was positive for equity markets. They increase the likelihood that the Fed will not raise rates in September, and the markets are set to open higher on this news.
That said, major market moves may have to wait ahead of Sunday's referendum in Greece. There are no negotiations scheduled to take place until after Sunday's referendum.
On Wednesday, while Canadian markets were closed for Canada Day, U.S. markets bounced back. The Dow Jones Industrial Average was up 0.79 per cent, the S&P 500 climbed 0.69 per cent, and the Nasdaq composite index gained 0.53 per cent. However, there will be some pressure on the S&P/TSX composite index today from energy stocks given Wednesday's plunge in oil prices. The energy sector represents approximately 20 per cent of the index.
West Texas Intermediate crude oil prices dropped over 4 per cent on Wednesday, closing just under U.S. $57. U.S. energy stocks were down, although the slide in most stocks was less than the drop in the commodity price. Shares of Halliburton dropped 3.5 per cent, Chesapeake sank 5.6 per cent, Baker Hughes declined 2.7 per cent, ConocoPhillips slid 2.2 per cent. I would expect Canadian energy stocks to take a hit today. This is a sector that I would remain underweight in.
Wednesday's nosedive in the price of oil came after the U.S. Energy Information Administration released its weekly oil inventory report. The report showed a build of oil inventories of 2.4 million barrels, while the Street was anticipating a decline. Inventories remain near levels not seen for this time of the year in at least the last 80 years.
Also concerning investors are prospects for additional oil supply coming on-line if an Iran nuclear deal is reached. Negotiations continue to take place with the deadline extended to July 7.
Also negative for oil prices on Wednesday was a strengthening U.S. dollar. And, according to a survey conducted by Reuters, OPEC supply had increased in June to 31.6 million barrels per day, driven by higher output from Saudi Arabia and record exports from Iraq.
Finally, technical support was broken with oil prices breaking below $57. Oil prices had been locked in a tight range, vacillating between U.S. $57.50 and U.S. $62. On Wednesday, a key technical support level was broken. This will weigh on the S&P/TSX composite index. Oil prices are stabilizing this morning, inching higher, just above the U.S. $57 level.
Overseas, the China Securities Regulatory Commission announced that it is relaxing the rules on margin trading. Chinese stock markets remain volatile. The Shanghai Stock Exchange composite index dropped 3.5 per cent. The Shenzhen Stock Exchange composite index took a 5.6 per cent hit.
Now, here's a closer look at the market numbers and what else is going on this morning.
MARKET DATA:
Futures
S&P 500 +0.3 per cent; Dow +0.3 per cent; Nasdaq +0.4 per cent
Equities
Hong Kong's Hang Seng +0.12 per cent
Shanghai composite index -3.47 per cent
Japan's Nikkei +0.95 per cent
London's FTSE 100 +0.22 per cent
Germany's DAX +0.08 per cent
France's CAC 40 0.00 per cent
Stoxx 600 -0.02 per cent
Commodities
WTI crude oil (Nymex Aug) +0.40 per cent at $57.19 (U.S.) a barrel
Gold (Comex Aug.) -0.64 per cent at $1,161.80 (U.S.) an ounce
Copper (Comex Sep) +0.15 per cent at $2.63 (U.S.) a pound
Currencies
Canadian dollar at 79.37 (U.S.), -0.0071
U.S. dollar index -0.047 at 96.26
Bonds
U.S. 10-year Treasury yield 2.44 per cent, +0.02
ECONOMIC INDICATORS:
U.S. nonfarm payrolls for June. It came in at 223,000 net new jobs, versus expectations of about 233,000. The U.S. jobless rate eased to 5.3 per cent, better than the consensus call of 5.4 per cent. April and May totals were lowered, however.
U.S. initial jobless claims for week of June 27. They came in at 281,000, higher than the Street estimate of 270,000.
(10 a.m. ET) U.S. factory orders for May. Consensus is a decline of 0.5 per cent from April
STOCKS TO WATCH:
Centene Corp., a provider of Medicaid insurance coverage, agreed to buy Health Net Inc. for about $6.8 billion in cash, stock and assumed debt. Health Net investors would receive 0.622 shares of St. Louis-based Centene and $28.25 in cash for each share they hold. The implied price of $78.57 a share represents a 21 per cent premium over Woodland Hills, California-based Health Net's closing price Wednesday.
Sears Canada Inc. is looking for a chief executive officer again, following its announcement Thursday that Ronald Boire will depart at the end of this summer — less than a year after taking on the job.
Intel president Renee James plans to step down, the company announced this morning.
K+S AG, the German potash supplier, plans to reject an $8.6 billion-plus takeover offer from Canadian fertilizer producer Potash Corp. of Saskatchewan Inc. because it deems the bid to be too low, Bloomberg is quoting sources as saying. The German company is preparing to announce its opposition to the bid as early as today.
Loblaw announced that strikes began at nine stores today operating in Windsor, Leamington, Chatham, Kingsville, and Sarnia. The company will continue to operate at all nine stores. Strikes are scheduled to begin in 60 other stores in Ontario. Meanwhile, Loblaw will recommence negotiations with union leaders.
BP said it will pay $18.7-billion to settle Deepwater claims.
Earnings include: International Speedway Corp.; Richelieu Hardware Ltd.
QUOTE OF THE DAY:
"Live as if you were to die tomorrow. Learn as if you were to live forever." Mahatma Gandhi
Jennifer Dowty