Before the Bell: Markets tepid ahead of Fed meeting

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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 Tuesday morning to you.

It is a tepid Tuesday in the markets, with major equity indices looking to open relatively unchanged to slightly lower today. In the U.S., Dow futures are down 43 points, S&P 500 futures are lower by 5 point, and Nasdaq futures are lower by 4 point.  In Canada, the S&P/TSX 60 Index futures are lower by 2 points.

The U.S. Federal Reserve kicks off its two-day policy meeting Tuesday with a rate decision announced on Wednesday at 2 p.m. (EST) with Fed Fund futures indicating less than a 10-per cent chance of an interest rate hike.

Overseas in the Pacific Rim, Japan's Nikkei 225 was down 0.9 per cent with some profit taking ahead the Bank of Japan's monetary policy meeting on Oct. 30. The Nikkei 225 is up 8 per cent month-to-date. In China, we saw modest moves with the Shanghai composite relatively unchanged, up 0.1 per cent.  Hong Kong's Hang Seng also gained 0.1 per cent. In Korea, the Kospi declined 0.2 per cent and in Australia, the S&P/ASX 200 was basically unchanged, down 0.03 per cent.

Major European markets are trading down slightly. The U.K. FTSE, German DAX and France's CAC are all down by approximately half a per cent. The U.K. FTSE is won 0.5 per cent, the German DAX is down 0.6 per cent, and in France, the CAC 40 is down 0.7 per cent.

In European economic news, third-quarter gross domestic product (GDP) figures from the United Kingdom were relatively in line with economists' expectations coming in at 2.3 per cent year-over-year, slightly lower than 2.4 per cent expected. On a quarter-over-quarter basis, GDP was 0.5 per cent, just below forecasts of 0.6 per cent.

European stock of note include U.K.-based, oil and gas giant, British Petroleum, which reported better-than-expected third-quarter results. Management also announced plans to reduce capital spending and maintain its dividend. Shares of BP are up by over one per cent on the London Stock Exchange. The world's largest chemical producer, BASF, reduced its outlook for 2015. Management said that third-quarter sales were down year-over-year due to a weaker economic environment and lower oil prices. Shares of BASF are down nearly 4 per cent in German markets.

Turning to earnings in North America, according to Bloomberg, 162 companies in the S&P 500 have reported quarterly results with 40 per cent of companies reporting better-than-expected sales and 73 per cent of companies have reported positive earnings surprises. In terms of growth, 47 per cent of companies have reported positive year-over-year sales growth and 56 per cent of companies have reported positive year-over-year earnings growth. So far, earnings for the quarter are tracking slightly below the prior quarter. Last quarter, 74 per cent of companies in the Index reported better-than-expected earnings and 60 per cent of companies reported positive earnings growth over the prior year.

Today, in the U.S. major companies reporting include Apple and Twitter. In Canada, there are five companies in the S&P/TSX composite index slated to release earnings today, they include DH Corp., Restaurant Brands, Colliers, Canadian National Railway, and Centerra Gold.

Commodities prices, more specifically energy prices, have been active. West Texas Oil futures cracked the $44 (U.S.) level on Monday, closing at $43.98. This morning, crude prices are under further pressure, slipping below $43. Oil prices have returned to the $42.50 to $47 range. Tony Hayward, the Chairman at Glencore, and former BP CEO, at an African oil and gas conference in Cape Town said, "I think we do need to be prepared for a period of sustained lower prices absent any form of intervention."  It is a bleak picture for natural gas with the price of natural gas futures plummeting nearly 10 per cent on Monday to $2.06 (U.S.) from $2.286. This morning, the downdraft continues with the price of natural gas futures down to $2, a level not seen since 2012. Shares of natural gas producer, EnCana, fell nearly 7 per cent on Monday. Meanwhile, spot gold prices are stable at $1,166 (U.S.).

Falling energy prices have put pressure on the Canadian dollar, which is below 76 cents per U.S. dollar, this morning. Currently, at 75.81 cents per U.S. dollar.

On Monday, major markets in the U.S. were relatively unchanged. The S&P/TSX composite index was off by 1.2 per cent, on light volume, with pressure from the health care sector, with shares of Valeant Pharmaceuticals down another nearly 5 per cent, as well as headwinds from the energy sector.

Here's the bottom line. Markets continue to digest recent gains from the month. U.S. equity markets experienced muted movements on Monday and look to open relatively unchanged today with the focus shifting to individual companies reporting earnings. The VIX Index, which measures fear in the marketplace remains low, just below 16.

Falling energy prices will put pressure on the S&P/TSX composite index.

Now, here is a look at major markets, and corporate and economic news.

MARKET DATA:

Futures

S&P 500 -0.12 per cent; Dow -0.15 per cent; Nasdaq: -0.13 per cent

Equities
Hong Kong's Hang Seng +0.12 per cent
Shanghai composite index +0.13 per cent
Japan's Nikkei -0.90 per cent
London's FTSE 100 -0.30 per cent
Germany's DAX -0.43 per cent
France's CAC 40 -0.47 per cent
Stoxx 600 -0.50 per cent

Commodities
WTI crude oil (Nymex Dec) -1.48 per cent at $43.33 (U.S.) a barrel
Gold (Comex Dec) -0.03 per cent at $1,165.90 (U.S.) an ounce
Copper (Comex Dec) +0.49 per cent at $2.37 (U.S.) a pound

Currencies
Canadian dollar -0.18 at 75.82 cents (U.S.).
U.S. dollar index -0.10 at 96.76

Bonds
U.S. 10-year Treasury yield 2.058 per cent, -0.250

ECONOMIC INDICATORS:

(8:30 a.m. ET) U.S. durable goods orders for September. Consensus is a decline of 1.3 per cent from August. Excluding transport, consensus is unchanged from previous month (a decline of 0.2 per cent).
(9 a.m. ET) U.S. S&P Case-Shiller Home Price Index for August. Consensus is an increase of 0.1 per cent from July and a 5.1-per-cent increase year over year.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for October. Consensus is 102.8, down from 103.0 in September

Canada – Alberta budget to be released

Earnings include: Acadian Timber Corp; Aflac Inc; Alibaba Group Holding Ltd; Ametek Inc; Apple Inc; Arthur J Gallagher & Co; Assurant Inc; AXIS Capital Holdings Ltd; B/E Aerospace Inc; Ballard Power Systems Inc; Baxter International Inc; Bristol-Myers Squibb Co; C.H. Robinson Worldwide Inc; Canadian National Railway Co; CanWel Building Materials Group Ltd; Capstone Mining Corp; Centene Corp; Centerra Gold Inc; Coach Inc; Colliers International Group Inc; Comcast Corp; CONSOL Energy Inc; Corning Inc; Cummins Inc; DDR Corp; DH Corp; Edison International; Epsilon Energy Ltd; Fidelity National Financial Inc; First National Financial Corp; Ford Motor Co; Gilead Sciences Inc; Ingersoll-Rand PLC; KKR & Co LP; Lexmark International Inc; Macerich Co; Merck & Co Inc; Pfizer Inc; PHX Energy Services Corporation; Restaurant Brands International Inc; Sherritt International Corporation; Simon Property Group Inc; Taseko Mines Ltd; United Parcel Service Inc; Verisk Analytics Inc; Waste Management Inc; Waters Corp; Watsco Inc; Wyndham Worldwide Corp

CORPORATE NEWS:

Restaurant Brands International Inc, formed last year out of Burger King's takeover of Canadian coffee chain Tim Hortons, said third-quarter profit soared from the preceding quarter, helped by new restaurants and lower costs. The company, posting third-quarter results for the first time, said net profit attributable to shareholders rose to $49.6-million, or 24 cents per share, from $9.6-million, or 5 cents per share, in the second quarter.

Ford Motor Co. reported sharply higher quarterly profit, driven by its record quarterly performance in North America, but missed Wall Street estimates because of higher taxes. Net income rose to $1.9-billion in the third quarter from $1.1-billion (U.S.) a year ago. After taxes, earnings per share, excluding one-time items, were 45 cents a share, one penny short of the consensus analyst estimate. The company said the shortfall was due to higher-than-expected taxes.

ANALYST ACTIONS:

Barclays initiated coverage on Silver Wheaton with an Overweight rating and a price target of $18 (U.S.).

Macquarie upgraded Columbia Sportswear from Underperform to Neutral.

Macquarie downgraded TripAdvisor from Outperform to Neutral with a price target of $84 (U.S.) from $56.

Mizuho Securities upgraded Valeant Pharmaceuticals from Neutral to Buy with a price target of $155 (U.S.), citing limited downside.

QUOTE OF THE DAY:

"You live longer once you realize that any time spent being unhappy is wasted." Ruth E. Renkl