U.S. stocks should edge closer to their highest levels in history as trading gets underway this morning, as a bit of the momentum from Wednesday's late-day surge carries into today
The Dow Jones industrial average closed up 175 points on Wednesday, for a two-day gain of 290 points. That has left it just 89 points from its record close of 14,164.53 on Oct. 9, 2007. U.S. stock index futures suggest a more modest gain at the open of today's session, but the index should be within spitting distance of that high - which doesn't, of course, factor in the impact of inflation. The more broader S&P 500 index has a little further to go; its record high is about 50 points away, at 1,565.15.
Canada's S&P/TSX composite index, by the way, isn't even close to its record highs of 2008. It's still trading below levels of earlier this month.
The week started precariously for markets after Italy's election resulted in a hung parliament. But optimism is returning for that part of the world, with speculation growing today that the country will form a coalition government. European leaders are expected to continue to put pressure on Italy to reform its fiscal house, and the outlandish Silvio Berlusconi may not be as big of a threat for austerity measures as markets may have first feared. In a sign of a little less concern of the country's political mess, the yield on 10-year Italian bonds this morning is down 5 basis points to 4.70 per cent.
Meanwhile, Federal Reserve Chairman Ben Bernanke's testimony in front of Congress this week provided the market with confidence that stimulative bond-buying measures by the central bank - as well as its low interest rate policy - will stay intact for some time.
Asian markets rallied overnight in the footsteps of Wall Street's gains - and European shares this morning are more modestly higher amid some encouragement from European Central Bank President Mario Draghi, who said he has no intention of tightening policy anytime soon given subdued inflation.
U.S. stock futures held steady after the country released a revision to fourth-quarter gross domestic product. The latest report shows the economy grew a very modest 0.1 per cent during the three-month period, well below economists' expectations for 0.5 per cent growth. Still, that was better than the 0.1 contraction initially reported.
On the TSX, a big focus will be on banking stocks after several of the Big 5 reported their latest earnings today. Overall, the results were pleasing to the Street.
Now, here's a more detailed look at what's going on this morning and what's to come.
MARKETS:
Equities:
U.S. futures: S&P 500 +0.2 per cent; Dow +0.1 per cent; Nasdaq +0.2 per cent
Hong Kong's Hang Seng index +1.96 per cent
Shanghai composite index +2.28 per cent
Japan's Nikkei +2.71 per cent
London's FTSE 100 +0.38 per cent
Germany's DAX +0.72 per cent
France's CAC 40 +0.39 per cent
Italy's FTSE MIB -0.08 per cent
Commodities:
WTI (Nymex Apr) -0.12 per cent at $92.64 (U.S.) a barrel
Gold (Comex Apr) -0.39 per cent at $1,589.60 (U.S.) an ounce
Copper (Comex May) +0.20 per cent at $3.57 (U.S.) a pound
Currencies:
Canadian dollar down 0.0023, or 0.23 per cent, at $0.9747 (U.S.)
ECONOMIC INDICATORS TO WATCH:
Statistics Canada said the current account deficit narrowed to $17.26-billion in the fourth quarter, a bit higher than some forecasts.
Canadian producer prices were unexpectedly flat in January - for the second consecutive month, Statistics Canada reported. Meanwhile, prices for raw materials used by manufacturers jumped 3.8 per cent driven by higher costs for crude oil.
U.S. GDP grew 0.1 per cent in the fourth quarter, well below economists expectations for 0.5 per cent growth. But that was better than the 0.1 contraction initially reported.
U.S. initial jobless claims for last week came in at 344,000, down from 362,000 the previous week and less than the 360,000 that was forecast.
STOCKS TO WATCH:
Royal Bank of Canada beat analysts' estimates in reported adjusted earnings of $1.38 a share, better than the $1.32 that was forecast by the Street. It also hiked its quarterly dividend.
Canadian Imperial Bank of Commerce adjusted earnings were $2.15 per share, up from $1.97 a year earlier and ahead of analysts' expectations of $2.08. It did not raise its dividend.
Toronto-Dominion Bank earned $1.79-billion in the first quarter, up from $1.48-billion a year ago, and raised its dividend by 5 per cent. Adjusted earnings also beat Street forecasts.
Groupon shares are down 27 per cent in the premarket after the daily-deals website warned late Wednesday that revenue for this quarter may below analysts' forecasts
J.C. Penney Co. shares are down 14 per cent after reporting a wider-than-expected fourth-quarter loss and disappointing sales.
Sears Holdings Corp. reported stronger-than-expected quarterly results on tight cost controls. Shares are up 4 per cent in the premarket.
Valeant Pharmaceuticals International Inc. reported both a fourth-quarter and full-year net loss. Shares opened down 0.7 per cent.
Other earnings today include: Altagas Ltd.; Barnes & Noble Inc.; Bayer AG; Bonavista Energy Corp.; British American Tobacco PLC; Deutsche Telekom AG; Domino's Pizza Inc.; Gap Inc.; George Weston Ltd.; Molycorp Inc.; National Bank of Canada; and Paladin Labs Inc.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
Bloomberg magazine reports in this month's addition about how the Canadian economy, led by the real estate sector, is on the verge of some big problems.
Pimco's Bill Gross says we should expect lower returns from bonds and stocks.
George Soros's latest stock picks.
So what works better: buying near 52-week lows or buying at 52-week highs? History points to a clear answer.
Twitter has the potential to match some of the money-gushing properties of the Internet's greatest money gusher, Google Inc.
New U.S. ETFs that are aimed at combating rising interest rates, inflation and quantitative easing.
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The premarket report is constantly updated to reflect the latest news developments and market moves. For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities
Darcy Keith