Investors are in a more upbeat mood this morning after Tuesday's harsh selloff, with a surprisingly strong quarterly report from Facebook helping to shift attention away from what has been a rather lousy earnings season so far.
That's not to say significant gains are expected when North American stock markets open this morning; U.S. stock futures and major commodities are only mildly in positive territory. But there's some appetite for bargain hunting after Tuesday's drubbing. Facebook is certainly seeing some of that; in the premarket, its shares are up a stunning 25 per cent, aided by several analyst upgrades to buy ratings.
Sentiment could change as the day progresses, however, as a bevvy of earnings reports are released (see Stocks and Economic Indicators to Watch below for the latest) and the U.S. Federal Reserve gives its latest comments on the economy this afternoon. The U.S. also has more housing data on tap today, and the Bank of Canada releases its Monetary Policy Report at 1030 a.m. (ET).
The news overnight from Europe wasn't terribly uplifting, but didn't create too much of a stir in overseas equity markets. The Markit preliminary composite purchasing managers index for the euro zone fell to a 40-month low of 45.8 from 46.1 in September, below economists' forecasts. Meanwhile, a survey of German business climate index fell to 100.0 for this month, worse than the 101.6 that was expected and the lowest reading since February 2010. And data released by Eurostat showed debt-to-GDP for the euro zone rose in the second quarter to 90 per cent from 88.2 per cent in the first three months of the year.
But news from China was positive. The preliminary reading of a purchasing managers' index by HSBC and Markit came in at 49.1 for October, up from a final reading of 47.9 in September, indicating the economy there may be reversing its slowdown.
Now, here's the rundown of what else you need to know before the trading day gets underway:
MARKETS:
Equities:
Futures: Dow +0.4 per cent, S&P 500 +0.5 per cent, Nasdaq +0.6 per cent
Hong Kong's Hang Seng index +0.31 per cent
Shanghai composite index +0.07 per cent
Japan's Nikkei -0.67 per cent
London's FTSE 100 +0.24 per cent
France's CAC 40 +0.54 per cent
Germany's DAX index +0.30 per cent
Commodities:
WTI (Nymex Dec) +0.16 per cent at $86.79 (U.S.) a barrel
Gold (Comex Dec) +0.08 per cent at $1,710.70 (U.S.) an ounce
Copper (Comex Dec) +0.10 per cent at $3.57 (U.S.) a pound
Currencies:
Canadian dollar up 0.0015, or 0.15 per cent, at $1.0092 (U.S.)
STOCKS AND ECONOMIC INDICATORS TO WATCH:
(1000 a.m. ET) The U.S. Commerce Department reports on new home sales in September. Economists expect 385,000 annualized sales.
(1030 a.m. ET) The Bank of Canada issues its Monetary Policy Report.
(215 p.m. ET) The U.S. Federal Reserve Board makes its interest rate announcement. Economists expect the key rate to remain unchanged at 0.25 per cent.
Facebook shares are up 25 per cent in the premarket. Both Citi and Bank of America upgraded the stock to a buy this morning after the social network superstar beat analyst expectations in its latest quarter and importantly showed progress in making money off smartphones.
Teck Resources reported adjusted profit of $349-million, down from $742-million a year ago, amid uncertain global economic conditions. It also pledged to defer some $1.5-billion in capital it had expected to spend this year and next year.
Encana reported a net loss of $1.24-billion (U.S.) in the third quarter, due mostly to a non-cash impairment charge. But operating earnings also declined to $263-million from $389-million.
Rogers Communications reported a third-quarter profit of $466-million, down from $491-million a year ago.
Canadian Pacific Railway said its third-quarter net income was $224-million, an increase of 20 per cent from a year earlier.
Boeing reported third-quarter earnings of $1.35, beating estimates of $1.12. Shares are up 4 per cent in the premarket.
AT&T reported earnings of 63 cents, beating estimates of 60 cents. Shares are up 2 per cent in the premarket.
Kimberly-Clark's third-quarter profits rose 20 per cent to $517-million, with adjusted profit of $1.34 beating Street forecasts of $1.32.
Eli Lilly & Co. reported adjusted earnings of 79 cents, down from $1.13 a year ago and below expectations of 84 cents.
General Dynamics reported quarterly revenue of $7.85-billion, missing forecasts of $8.03-billion, but the company said demand was particularly strong for aerospace products.
Other earnings out today include: Agnico Eagle Mines Ltd., Akamai Technologies Inc., Kimberly-Clark Corp., Lockheed Martin Corp., Lundin Mining Corp., Mullen Group Ltd., Nasdaq OMX Group Inc., Northrop Grumman Corp., Transforce Inc., Vale SA, and Volkswagen AG
THIS MORNING'S TOP INVESTING READS ON THE WEB:
Amid a lackluster earning season that has featured many companies missing sales expectations, cash balances have swelled 14 per cent and are on track toward $1.5-trillion for the S&P 500, according to JPMorgan. Both levels would be historic highs.
U.S. corporate profit margins have been stretched about as far as they can go.
Would the stock market react any differently following a President Obama victory than to a Mitt Romney win? The honest answer is that no one knows.
Inflation hawks point to a rising asset prices as a sign of inflation. But, as this chart shows, asset prices have little to do with consumer inflation.
What can you expect from a passive asset allocation strategy that owns all the major asset classes? More than you might think.
Hedge funds have been snapping up Greece's debt.
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For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities
Darcy Keith