North American stock markets opened modestly in the red, as traders turned more cautious a day after the "fiscal cliff" relief rally that many seasoned market watchers contended got carried away.
In early trading, the S&P/TSX index was down 36 points, or 0.2 per cent, at 12,504; the S&P 500 was off 3 points, or 0.2 per cent, at 1,459; and the Dow Jones industrial average was down 42 point, or 0.3 per cent, at 13,370. Commodities were also lower, which was hindering the performance of Toronto's main index. Crude oil was down 35 cents at $92.77 (U.S.), and gold - under pressure from a stronger U.S. dollar - was off $10.40 at $1,678.
Markets are sobering up after celebrating the 11th-hour deal in Washington that will prevent hefty tax increases and spending cuts from immediately taking hold. Major U.S. indexes jumped by at least 2.4 per cent on Wednesday, even as many economists, analysts and skeptical investors were warning it appeared to be an overreaction to a deal that hardly put the U.S. fiscal house in order for the long term.
While the issue of tax cuts was largely settled, the automatic spending cuts were only delayed by two months and U.S. lawmakers still face acrimonious debate on the debt ceiling. Near-term risks may have been eliminated, but there's still considerable uncertainty about a bigger U.S. budget package for the future that may involve more political brinkmanship and gridlock in the U.S. capital. As such, the sequel to the "fiscal cliff" drama isn't very far away.
Traders are now looking to Friday's non-farm payrolls report in the U.S. as the next major driver for market direction. There was a mixed reading on the U.S. employment picture this morning, with the ADP private payroll report showing greater-than-expected job gains of 215,000 in December, a sharp rise from November's gains of 118,000. But initial U.S. jobless claims for last week rose by 10,000 to 372,000, more than economists had anticipated and up from the previous week's 350,000.
Another focus today will be on the release of minutes at 2 p.m. ET this afternoon from the Federal Reserve's policy meeting on Dec. 11-12. It set unusually stringent conditions on interest rates at that time, pledging to keep them at near-zero as long as the unemployment rate is above 6.5 per cent and inflation is tame.
Markets are also absorbing December sales figures from a raft of U.S. retailers this morning. It's the most important period on the retail calendar and at least seven of the 19 largest retailers reported sales results for the month. Of those that reported, four have missed analysts' estimates, according to CNBC, which cited Thomson Reuters data.
Major automakers are also reporting their sales data this morning and the numbers are beating Street expectations. Ford's sales rose 1.9 per cent, Chrysler's 10 per cent, and General Motors' 4.9 per cent. Ford shares are up 2.4 per cent and GM shares 1.5 per cent.
Here's a look at some other corporate news so far today:
Brookfield Asset Management and fund manager Pershing Square have resolved a dispute over General Growth Properties, owner of regional shopping malls in 41 states. Pershing has dropped efforts to have General Growth sold and Brookfield has agreed to buy GGP warrants held by Pershing.
Hormel Foods Corp. is buying Skippy peanut butter from Unilever for $700-million.
Gap Inc. has approved a new $1-billion share repurchase program and said it is buying luxury fashion retailer Intermix for $130-million (U.S.).
Safeway's CEO Steve Burd will retire in May after more than 20 years with the grocer.