Jennifer Dowty, Chartered Financial Analyst, writes exclusively for Globe Unlimited subscribers. The Before the Bell report is updated throughout the premarket to reflect latest developments.
Good Thursday morning to you.
Markets have see-sawed this week. Wednesday's losses in equity markets appears set to be erased today with futures indicating a higher opening for the major markets. In the U.S., Dow futures are higher by 82 points, S&P500 futures are up 7 points, and Nasdaq futures are up 24 points. In Canada, S&P/TSX 60 Index futures are up 2 points.
Canadian Retail Sales in August came in better-than-expected at 0.5 per cent, compared to expectations of 0.1 per cent month-over-month. The prior month was revised up to 0.6 per cent from 0.5 per cent. However, excluding auto sales, retail sales were weaker-than-expected unchanged, compared to expectations of an increase of 0.2 per cent, the prior month was revised higher to 0.1 per cent from 0 per cent. These numbers clearly indicate that retail sales are being driven higher by autos. New car sales increased 1.7 per cent, and used car sales jumped 5.5 per cent.
Also positive were sales at furniture stores up 3.2 per cent month-over-month, sales at home furnishing stores climbed 2.6 per cent, and sales at beer, wine, and liquor stores increased 4.6 per cent. Sales at supermarkets and other grocery stores, excluding convenience stores, declined 0.4 per cent month-over-month.
In terms of provinces, retail sales were positive month-over-month in all provinces and territories except for Newfoundland and Labrador, Nova Scotia, Manitoba, and Nunavut.
Overnight in the Pacific Rim, Chinese markets snapped back after yesterday's declines on news that the People's Bank of China injected $16.6-billion to 11 financial institutions. This restored investors' confidence that Chinese authorities will take actions necessary to support the economy. The Shanghai composite advanced 1.5 per cent and the Shenzhen composite rallied 3.7 per cent. In Japan, the Nikkei 225 was down slightly by 0.6 per cent. In Australia, the S&P/ASX 200 was up 0.3 per cent.
Major European markets moved higher after the President of the European Central Bank, Mario Draghi, indicated that more stimulus measures are being considered at today's news conference. The U.K. FTSE is relatively unchanged, the German DAX is up 0.7 per cent, and France's CAC is up 0.5 per cent. The ECB left rates unchanged as expected.
On the commodity front, the weekly oil inventory report was released from the U.S. Energy Information Administration on Wednesday was weak. Oil inventories increased by over 8 million barrels for the week ending Oct. 16, which was more than double expectations. What was positive was the price of West Texas Intermediate (WTI) oil futures. The price of WTI oil declined roughly $1 (U.S.) to $45.20 from $46.29 but remained in the mid-$45 range. This morning, the price of WTI oil is higher, just under $46. There appears to be strong support for oil in the mid-$40 range. Conversely, the price of natural gas futures continue to fall and has yet to find support. On Wednesday, natural gas futures declined 3 per cent to $2.40 (U.S.). The price of spot gold is stable at $1,168 (U.S.).
Here is a snapshot as to how this earnings season is faring. In the U.S., 102 companies in the S&P 500 Index has reported. 43 per cent of companies have reported better-than-expected sales, and 72 per cent of companies have delivered better-than-expected earnings. However, growth remains absent with just 41 per cent of companies reporting positive year-over-year sales growth and 52 per cent of companies reporting positive year-over-year earnings growth.
Here is the bottom line. During this earnings season, we have seen a plethora of negative headlines, and yes, some stocks have been hammered. Yet, the markets have been quietly recovering. The S&P 500 is just over 5 per cent away from its all-time high set on May 21. The months of November and December are historically positive months as investors look forward to a new year, analysts roll-out their 2017 earnings forecasts, and stocks are revalued based on these forward numbers. I anticipate, markets will continue to quietly climb the wall of worry higher as we exit the year, and would use dips in the market to accumulate shares of companies with solid fundamentals and outlooks with a staggered buying approach.
Now, here is a closer look at major markets, and corporate and economic news.
S&P 500 +0.37 per cent; Dow +0.32 per cent; Nasdaq: +0.45 per cent
Hong Kong's Hang Seng -0.63 per cent
Shanghai composite index +1.46 per cent
Japan's Nikkei -0.64 per cent
London's FTSE 100 -0.12 per cent
Germany's DAX +0.40 per cent
France's CAC 40 +0.19 per cent
Stoxx 600 +0.10 per cent
WTI crude oil (Nymex Dec.) 1.46 per cent at $45.86 (U.S.) a barrel
Gold (Comex Dec) +0.04 per cent at $1,167.70 (U.S.) an ounce
Copper (Comex Dec) +1.44 per cent at $2.39 (U.S.) a pound
Canadian dollar +0.12 at 76.22 cents (U.S.).
U.S. dollar index +0.05 at 95.08
U.S. 10-year Treasury yield 2.03 per cent, -0.04
The euro zone holds its ECB monetary policy meeting and reports its October consumer confidence, expected at -7.4.
(8:30 a.m. ET) Canada releases its August retail sales, expected to come in at a 0.1 per cent increase.
(8:30 a.m. ET) U.S. reports initial weekly jobless claims, expected to show an increase of 10,000 to 265,000.
(8:30 a.m. ET) U.S. releases the Chicago Fed National Activity Index for September, expected to show an increase of 0.1.
(10 a.m. ET) U.S. reports its existing home sales for September, expect to show a 0.8 per cent increase to 5.35 million.
(10 a.m. ET) U.S. reports its September leading indicator, expect to show a 0.1 per cent increase.
(11 a.m. ET) U.S. reports its Kansas City Fed Manufacturing Activity for October, expected to be -9.
Earnings include: 3M Co, Alaska Air Group Inc, Alliance Data Systems Corp, Alphabet Inc, Altera Corp, Amazon.com Inc, American Electric Power Company Inc, Arctic Cat Inc, AT&T Inc, athenahealth Inc, Beasley Broadcast Group Inc, BJ's Restaurants Inc, Boise Cascade Co, Boyd Gaming Corp, Cabela's Inc, Cameron International Corp, Capital One Financial Corp, Caterpillar Inc, Comstock Mining Inc, Cypress Semiconductor Corp, Daimler AG, DeVry Education Group Inc, Dow Chemical Co, Dr Pepper Snapple Group Inc, Dunkin' Brands Group Inc, E*TRADE Financial Corp, Eastman Kodak Co, Eli Lilly and Co, Euronet Worldwide Inc, Federated Investors Inc, Fortinet Inc, Franklin Resources Inc, Freeport-McMoRan Inc, Gigamon Inc, Hancock Holding Co, Heartland Express Inc, Insteel Industries Inc, Janus Capital Group Inc, Juniper Networks Inc, KB Financial Group Inc, Keppel Corporation Ltd, LaSalle Hotel Properties, McDonald's Corp, Mead Johnson Nutrition Co, Microsoft Corp, Monro Muffler Brake Inc, Nasdaq Inc, NETGEAR Inc, NetSuite Inc, Pacific Mercantile Bancorp, Penn National Gaming Inc, Precision Drilling Corp, QLogic Corp, Quest Diagnostics Inc, Raytheon Co, Reliance Steel & Aluminum Co, Ryder System Inc, Sirius XM Holdings Inc, Skechers USA Inc, Snap-On Inc, Southwest Airlines Co, Stanley Black & Decker Inc, TransForce Inc, Ultratech Inc, Under Armour Inc, Union Pacific Corp, United Continental Holdings Inc, Unitil Corp, USG Corp, Verisign Inc, Westinghouse Air Brake Technologies Corp.
A precipitous plunge in the stock price of Valeant Pharmaceuticals International Inc. cost some of Wall Street's top names billions of dollars on Wednesday but hedge fund manager William Ackman took the meltdown as a buying opportunity. The billionaire, famed for his brash bets, swept up 2.1 million additional shares as the Canadian-based company plunged as much as 40 per cent on a report from an influential short-seller that it may have fraudulently inflated revenues.
McDonald's Corp reported its first rise in quarterly global same-restaurant sales in more than a year as demand recovered in China, where it had struggled after a food safety scandal, and menu changes boosted sales in the United States. McDonald's net income rose to $1.31-billion (U.S.), or $1.40 per share, in the quarter ended Sept. 30 from $1.07-billion, or $1.09 per share, a year earlier. Revenue fell 5.3 per cent to $6.62-billion.The world's biggest restaurant chain by sales said on Thursday that its global same-restaurant sales rose 4 per cent in the third quarter.
Teck Resources Ltd. is reporting a $2.1-billion loss for the third quarter, mostly because of a writedown of its coal assets. The third-quarter including $2.2-billion of writedowns resulted in a net loss of $3.73 per share, compared with a profit of 14 cents per share or $84-million last year.
Rogers Communications Inc. reported third-quarter earnings that topped analysts' estimates as it added more customers than projected. Profit excluding certain items was 92 cents a share, the Toronto-based company said Thursday in a statement. Analysts predicted 82 cents. Sales grew 4 per cent to $3.38-billion from $3.25-billion a year earlier, compared with projections for $3.32-billion. Rogers added 77,000 new contract wireless customers, a second straight quarterly gain
Precision Drilling Corp. is writing down the value of its assets and planning for a much smaller capital spending budget next year, the company said Thursday as it reported a 38 per cent decline in third-quarter revenue. The Calgary based company reported an $87-million net loss, or 30 cents per share, for the three months ended Sept. 30, as revenue dropped to $364-million from $584.5-million in last year's third quarter when the oil and gas industry was booming.
UBS upgraded Western Digital Corp. to "neutral" from "sell" and boosted its price target to $75 (U.S.) from $67 following the deal to acquire SanDisk for about $19-billion. But BMO Capital analyst Keith Bachman said he believes the deal is "expensive" and the the debt Western Digital would incur would be high.
Meanwhile, B. Riley downgraded SanDisk to "neutral" from "buy." And Morgan Stanley downgraded SanDisk to "equalweight" from "overweight."
UBS initiated coverage on GoDaddy Inc. with a "buy" rating and a price target of $40 (U.S.).
Bank of America/Merrill Lynch maintained a "buy" rating on Valeant Pharmaceuticals with a price target of $290 (U.S.). Analyst Sumant S. Kulkarni said he continues to monitor concerns related to improper pricing and alleged irregularities in financial reporting, but he believes Valeant presents an "enhanced buying opportunity" at current levels.
QUOTE OF THE DAY:
"Ultimately, spiritual awareness unfolds when you're flexible, when you're spontaneous, when you're detached, when you're easy on yourself and easy on others." Deepak Chopra