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.
The Dow took another run at the 20,000 round number peaking at 19,998 after getting within less than point of the big round number on Friday. U.S. index futures have since slipped back a bit into the morning trading down 0.1 per cent. Overseas the FTSE is flat while the Dax is down 0.5 per cent.
In currency trading the U.S. dollar is flat to up slightly against most currencies while the yen and gold are outperforming, indicating the rebound in defensive plays from really depressed conditions continues. Commodities are lower in what looks like a trading correction with WTI crude oil down 1.6 per cent and copper down 0.6 per cent on no news.
Today is the first day of the Detroit Auto Show so auto stocks may attract attention. Usually, its new models and innovations that dominate the headlines. This, year, however, production locations and politics may also generate a lot of interest. Since the election of Donald Trump, some automakers like Ford have changed their minds about moving production to Mexico while others like Toyota may dig in their heels. Driverless cars, increased competition in alternative energy vehicles (affecting companies like Tesla Motors, Ballard Power and others) and the automation of production may also be topics of interest.
In Europe today, the future of the EU remains in focus, In the U.K., Prime Minister Theresa May confirmed the country is still moving toward Brexit. A survey of British economists was bearish on Brexit but considering how dead wrong the 'Chorus of Brexit Doom' has been over the last year and how well the data indicates the U.K. economy has been doing since the big vote, the pro-European establishment's credibility is pretty much shot and I would be surprised to see this get much traction outside of some places in the media. What modellers always forget is that market and economies adapt to changing situations quickly.
Meanwhile in Germany, Vice Chancellor Sigmar Gabriel, head of the Social Democrats, has started to stake out territory ahead of this year's German elections. There has been talk of a coalition of the left to replace the current Grand Coalition that has kept Angela Merkel in power. Also, Mr. Gabriel indicated a breakup of the EU is no longer unthinkable, that austerity has left the Eurozone more divided than united and that his party favours a focus on investment over failed austerity policies.
The parade of Fed speakers has continued over the weekend and into today. The overall tone of the comments remains moderately hawkish with more interest rate increases likely this year with the U.S. approaching full employment. Still, the party line remains toward three hikes this year rather than the four to five increases that the street has priced into the U.S. dollar.
Now, here is a closer look at what's going on this morning and what is still to come.
MARKET DATA:
Futures (as of about 9:00 a.m. ET)
Dow -0.23 per cent; S&P 500 -0.12 per cent; Nasdaq: +0.04 per cent; TSX 60 +0.06 per cent
Equities
Japan's Nikkei (market closed)
Shanghai composite index +0.55 per cent
Hong Kong's Hang Seng +0.25 per cent
Germany's DAX -0.56 per cent
London's FTSE +0.28 per cent
France's CAC 40 -0.75 per cent
Commodities
WTI crude oil (Nymex Feb.) -2.0 per cent at $52.91 (U.S.) a barrel
Gold (Comex Feb.) -0.51 per cent at $1,179.40 (U.S.) an ounce
Copper (Comex March) -0.49 per cent at $2.53 (U.S.) a pound
Currencies
Canadian dollar -0.2 at 75.36 cents (U.S.)
U.S. dollar index +0.17 at 102.41
Bonds
Canada 10-year bond yield +0.40 at 1.68 per cent
KEY ECONOMIC RELEASES
Japan markets closed.
China December foreign reserves.
Euro area November jobless rate.
(10 a.m. ET) Federal Reserve labour market conditions index for December..
(10:30 a.m. ET) Bank of Canada releases its business outlook survey and senior loan officer survey for the fourth quarter.
KEY STOCKS TO WATCH
Also see: Monday's small-cap stocks to watch
**
Canadian yoga and leisure apparel retailer Lululemon Athletica Inc. said on Monday it now expects its fourth-quarter net revenue to be $775-million to $785-million, from the company's previous forecast of $765-million to $785-million. Lululemon also expects its fourth-quarter earnings to be $0.99-$1.01 per share from its previous guidance of $0.96-$1.01, per share.
**
General Motors has no plans to change where it produces small cars because of criticism from President-elect Donald Trump, the company's top executive said Sunday night. CEO Mary Barra said the auto business has long lead times for where it produces vehicles, with decisions are made two to four years ahead.
**
Vertex Pharma lost 5.2 per cent to $75.25 after the company gave a full-year revenue forecast for its Orkambi cystic fibrosis treatment, which an Evercore ISI analyst said appeared to miss analysts' expectations.
**
French drugmaker Ipsen SA said it would buy the oncology assets of the U.S.-based drugmaker Merrimack Pharmaceuticals for up to $1-billion. Merrimack shares jumped nearly 33 per cent in premarket trading.
**
Candy and pet food maker Mars Inc. said it would buy VCA Inc., which runs hospitals for animals, for $7.7-billion. Mars, the maker of Whiskas and Pedigree pet products, will pay $93 per share, a premium of 31.4 percent to VCA's Friday closing price.
**
Urban Outfitters said comparable retail segment net sales for the two-month holiday shopping period ended Dec. 31, 2016, rose 1.5 per cent from the same period the prior year. Total company net sales saw a 3 per cent year-over-year increase. Its shares fell 5 per cent in premarket trading.
**
UnitedHealth subsidiary Optum is acquiring Surgical Care Affiliates in a deal worth about $2.3-billion. Shares of SCA jumped 15 per cent in premarket trading, while UnitedHealth shares traded half a per cent lower.
**
Global Payments shares climbed more than 5 per cent in premarket trading after it raised its current-year guidance to adjusted earnings per share of $3.70 to $3.90, up from the prior estimate of $3.45 to $3.55. Its revenue estimate of $3.35 billion to $3.45 billion was also up from a previous forecast of a $3.2 billion to $3.3 billion range.
**
Ariad Pharmaceuticals shares soared 73 per cent in premarket trading after Japan's Takeda Pharmaceutical Co. Ltd. announced it will acquire Ariad in a deal worth about $5.2 billion, or $24 a share, to beef up its oncology pipeline. Shares of Ariad closed at $13.74 on Friday.
**
McDonald's said it is selling a controlling stake in its China business to an investor group led by state-owned Chinese conglomerate Citic. Washington-based private equity firm The Carlyle Group will also have a stake in the deal, which is valued at up to $2.1 billion.
**
Goldman Sachs downgraded Coca-Cola stock to "sell" from "neutral" and cut its price target to $39 a share, citing recent structural changes and currency headwinds that will likely constrain earnings growth.
**
Goldman Sachs upgraded Dr. Pepper Snapple to "neutral" from "sell" given a more favourable backdrop for U.S.-focused staples stocks, including potential benefits from tax reform.
**
Goldman Sachs downgraded Procter & Gamble to "sell" from "neutral" and trimmed its earnings estimate and valuation multiple, given Procter & Gamble's stretched valuation relative to its peers.
**
Earnings include: Acuity Brands Inc., Global Payments Inc., VOXX International Corp., Continental Precious Minerals.
With files from wire services