The Before the Bell report is constantly updated to reflect the latest news developments and market moves in the premarket. Check back later for updates.
The celebration over the U.S. budget deal, which was signed into law overnight by President Barack Obama after being approved by both chambers in Congress, has already fizzled out.
The Dow surged just over 200 points on Wednesday as the Senate reached a deal on raising the debt ceiling and returning all U.S. government employees back to work. But the buying momentum isn't continuing into today, even after the Republican-led House of Representatives voted in favour of the deal late into the evening. North American stock futures are trading negatively ahead of the open and overseas markets are seeing a lot of red as well.
The market's turn negative this morning isn't too surprising given equity values - more so in the U.S. than in Canada - have been bid up over the past week in anticipation of a deal. But beyond the buy the rumour, sell the fact effect, there's also disappointment the deal simply kicks the can down the road when it comes to resolving fundamental differences between the Republicans and Democrats. The government will be funded only until Jan. 15 of next year and the debt ceiling will need tampering with again by Feb. 7.
Echoing this disappointment over the lack of a long-term resolution was the Chinese credit rating agency Dagong, which overnight downgraded the U.S. sovereign rating to A- from A with a negative outlook. That action put further pressure on the U.S. dollar, which in turn has given a shot in the arm to gold prices this morning, with futures prices up close to 2 per cent.
One potentially supportive factor for markets out of the recent mess in Washington is that the Federal Reserve is probably in no rush to start the tapering of its $85-billion a month bond-buying program, also known as quantitative easing. Fourth-quarter economic growth in the U.S., not to mention consumer confidence, probably took a modest hit as a result of the U.S. government shutdown and the threat of the debt ceiling breach. The short-term agreement promises to raise more bipartisan battles heading into next year. As such, there's a growing conviction in world markets this morning that the Fed may delay any reduction in its stimulus measures until its meeting in March.
Now, here's a closer look at what's going on this morning and what is to come.
MARKETS:
Equities:
Futures: S&P 500 -0.13 per cent; Dow -0.25 per cent; Nasdaq -0.02 per cent; S&P Toronto -0.22 per cent
Hong Kong's Hang Seng -0.57 per cent
Shanghai composite index -0.33 per cent
Japan's Nikkei +0.83 per cent
London's FTSE 100 Unchanged
Germany's DAX -0.38 per cent
France's CAC 40 -0.35 per cent
Commodities:
WTI crude oil (Nymex Dec) -0.48 per cent at $101.81 (U.S.) a barrel
Gold (Comex Dec) +1.80 per cent at $1,305.40 (U.S.) an ounce
Silver (Comex Dec) +1.71 per cent at $21.73 (U.S.) an ounce
Copper (Comex Dec) -0.77 per cent at $3.28 (U.S.) a pound
Currencies:
Canadian dollar at 97.09 (U.S.), up 0.0027 from Wednesday's North American close.
U.S. dollar index down 0.55 at 79.91
Bonds:
U.S. 10-year Treasury yield 2.63 per cent, down 0.04
ECONOMIC INDICATORS TO WATCH:
U.S. jobless claims last week fell 15,000 to 358,000, a weaker reading than the 330,000 new claims that was forecast by economists.
(10 a.m. ET) U.S. releases the Philadelphia Fed Survey for October, with the general business conditions index forecast to decline to 15.0 from 22.3 in September.
STOCKS TO WATCH:
Shares in Goldman Sachs are down about 1 per cent in the premarket after the banking giant beat earnings estimates for the third quarter but disappointed the Street with its revenues, which were hurt by a 44 per cent slump in fixed-income sales. The bank raised its quarterly dividend by five cents to 55 cents a share.
Verizon shares are up 2 per cent in the premarket after reporting adjusted earnings per share of 77 cents, ahead of Street forecasts for 74 cents.
Choice Properties said it will buy a property portfolio from Loblaw for $150-million.
Shares in IBM are down 6 per cent in the premarket after late Wedesday reporting a 4 per cent drop in third-quarter revenue, worse than expected, even as it beat earnings estimates.
EBay shares are down about 6 per cent in the premarket after delivering a weaker-than-expected earnings and revenue outlook for the current quarter through December.
American Express shares may rise after the company delivered better-than-expected earnings late on Wednesday.
Other earnings today include Advanced Micro Devices, Capital One, Chipotle Mexican Grill, Google, Union Pacific, Travelzoo and Philip Morris International.
ANALYST ACTIONS:
TD Securities initiated coverage on the Bank of Montreal with a "hold" rating and $76 (Canadian) price target. It also started coverage on the other major banks, giving CIBC and TD a "buy" rating. RBC and National bank got "hold" ratings and Bank of Nova Scotia was given TD's highest rating of "action list buy."
BMO Nesbitt Bruns cut its price target on TMX Group to $56 (Canadian) from $58 but reiterated an "outperform" rating.
UBS downgraded IBM to "neutral" from "buy" and cut its price target to $186 (U.S.) from $235. BMO Nesbitt Burns cut its target to $195 from $215 and reiterated a "market perform" rating. Goldman Sachs cut its target to $175 from $195 and maintained a "neutral" rating.
Oppenheimer upgraded Best Buy to "outperform" from "perform" and raised its price target to $50 (U.S.) from $36.
RBC Dominion Securities downgraded CXS Corp. to "sector perform" from "outperform" and cut its price target to $28 (U.S.) from $31.
RBC Dominion Securities downgraded Norfolk Southern to "sector perform" from "outperform" and cut its price target to $89 (U.S.) from $94.
Needham & Co. upgraded SanDisk to "strong buy" from "buy" and raised its price target to $90 (U.S.) from $80.
BMO Nesbitt Burns raised its price target on Yahoo to $32 (U.S.) from $27 and reiterated a "market perform" rating.
Cowen upgraded Cliffs Natural Resources to "market perform" from "underperform" and raised its price target to $20 (U.S.) from $11.
RBC Dominion Securities upgraded Enerplus to "outperform" from "sector perform" and raised its price target to $22 (Canadian) from $20.
CIBC World Markets cut its price target on Gluskin Sheff & Associates to $20 (Canadian) from $21.50 and reiterated a "sector performer" rating.
RBC Dominion Securities raised its target on American Express to $65 (U.S.) from $61 but reiterated an "underperform" rating.
RBC cut its target on EBay to $59 (U.S.) from $64 and reiterated an "outperform" rating.
RBC Dominion Securities upgraded Alliant Techsystems to "outperform" from "sector perform" and raised its price target to $122 (U.S.) from $109.
M Partners initiated coverage on Trevali Mining with a "buy" rating and $2 price target.
Clarus Securities initiated coverage on Raging River Exploration with a "buy" rating and $8 (Canadian) price target.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
The Dow Theory, perhaps the oldest market timing system that remains in widespread use today, is painting a bullish picture.
The odd reason why gold rose on the Senate deal.
The overall bull and bear cases for markets right now.
For Apple investors, why the iPad is more important than the iPhone.
The Nasdaq would be doing even better if not for all those tech stocks.
Portfolio diversification has become more challenging during the past five years.
Four U.S. stocks that offer good bait for activist investors.
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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