Jennifer Dowty
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.
A very good Thursday morning to you. North American futures are down this morning, as markets continue to gyrate to-and-fro this week and digest Wednesday's solid gains. A number of earnings reports on both sides of the border will make for active trading in a number of large-cap stocks.
In the U.S., Dow futures are down 71 points, S&P 500 futures are lower by 9 points, and Nasdaq futures are down 26 points. In Canada, the S&P/TSX 60 Index futures are down 5 points.
Overseas in the Pacific Rim, in Japan, the Nikkei 225 was relatively neutral, up 0.2 per cent ahead of the Bank of Japan's monetary policy meeting on Friday. September industrial production figures were better-than-expected, advancing one per cent month-over-month, ahead of expectations of a decline of 0.6 per cent. On a year-over-year basis, industrial production in Japan fell 0.9 per cent, ahead of a decline of 2.6 per cent anticipated by economists. This positive data leaves investors uncertain as to whether or not the central bank will expand monetary policy measures aimed to support the economy this week. In China, the Shanghai composite advanced 0.4 per cent, and the Shenzhen composite gained 0.8 per cent.
Turning to major European markets, markets are reversing course and are lower in today's trading session. The London FTSE is down one per cent. In France, the CAC is down 0.7 per cent, and in Germany, the Xetra DAX is down just 0.3 per cent. In economic news, Germany's October unemployment rate remained at 6.4 per cent, unchanged from last month. In Spain, retail sales in September beat forecasts, coming in at 4.3 per cent year-over-year, compared to forecasts of 3 per cent.
Looking at European stock movers, shares of Deutsche Bank are down 6 per cent in German markets. The CEO, John Cryan, outlined the bank's strategic plan, announcing job cuts, plans to dispose assets and exit operations in 10 countries, and the suspension of its dividend over the near-term. Another financial institution in the red today is Barclay's, with shares down 5 per cent on the London Stock Exchange, after the company reported weaker-than-expected financial results. Shares of Royal Dutch Shell are also under pressure today, falling 1 per cent after reporting third-quarter results below expectations with headwinds from lower energy prices. On the positive side, shares of Nokia and Alcatel-Lucent are on the rise today, with shares of both companies up 9 per cent. Management at Nokia announced plans to return capital to shareholders through dividends and share buybacks.
Turning to North American earnings, we are halfway through this earnings season with 249 companies in the S&P 500 reporting quarterly results. According to Bloomberg, to-date, 45 per cent of companies reported better-than-expected sales and 76 per cent of companies reported positive earnings surprises. In terms of growth, 49 per cent of companies have reported positive year-over-year sales growth and 60 per cent of companies have reported positive year-over-year earnings growth. Last quarter, 74 per cent of companies in the index reported better-than-expected earnings and 59 per cent of companies reported positive earnings growth over the prior year.
There are 48 companies in the S&P 500 index reporting earnings today. In Canada, there are 15 companies in the S&P/TSX composite index slated to release earnings today. They include Bombardier, Goldcorp, Canadian Oil Sands, AltaGas, OceanaGold, Potash, Cenovus, Fairfax Financial, Nevsun Resources, Yamana Gold, Genworth, Intertain, Maple Leaf Foods, Superior Plus, and WSP Global.
In commodities, the price of crude jumped 6 per cent on Wednesday to $45.94 (U.S.) after the weekly oil inventory report released from the U.S. Energy Information Administration (EIA) showed a build in inventory levels, but lower than expectations. This morning, the price of West Texas Intermediate oil futures are down 45 cents to $45.49 (U.S.). Also moving yesterday was the price of gold, which declined over $10 (U.S.) to $1,156, driven lower by a surging U.S. dollar after a statement released from the U.S. Federal Reserve indicated that a rate hike is still on the table for 2015. The price of natural gas futures are up sharply this morning to $2.31 from $2.03 on Wednesday, ahead of the weekly U.S. natural gas inventory report released today by the EIA at 10:30 a.m. (EST).
Here is the bottom line. On Wednesday, a statement from the U.S. Federal Reserve indicated that an interest rate increase may occur in 2015, depending on economic data. The Fed stated that the U.S. economy, "has been expanding at a moderate pace" and removed the line that global developments may restrain economic growth. Key reports to watch for are U.S. third-quarter GDP out later this morning, as well as U.S. non-farm payroll data to be released next Friday. As well, next week, watch for Chinese economic reports, with October purchasing managers' index data as well as October trade data released.
Now, here is a look at major markets, and economic and corporate news.
MARKET DATA:
Futures
S&P 500 -0.4 per cent; Dow -0.4 per cent; Nasdaq: -0.6 per cent
Equities
Hong Kong's Hang Seng -0.59 per cent
Shanghai composite index +0.35 per cent
Japan's Nikkei +0.17 per cent
London's FTSE 100 -0.93 per cent
Germany's DAX -0.28 per cent
France's CAC 40 -0.69 per cent
Stoxx 600 -0.22 per cent
Commodities
WTI crude oil (Nymex Dec) -1.46 per cent at $45.27 (U.S.) a barrel
Gold (Comex Dec) -1.46 per cent at $1,158.90 (U.S.) an ounce
Copper (Comex Dec) -1.12 per cent at $2.34 (U.S.) a pound
Currencies
Canadian dollar -0.15 at 75.64 cents (U.S.).
U.S. dollar index -0.409 at 97.37
Bonds
U.S. 10-year Treasury yield 2.09 per cent, -0.008
ECONOMIC INDICATORS:
The number of Americans filing new applications for unemployment benefits rose marginally and the underlying trend continued to point to a fairly healthy labor market. Initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 260,000 for the week ended Oct. 24, the Labor Department said on Thursday. They remained not too far from levels last seen in late 1973. The prior week's claims were unrevised.
U.S. GDP in the third quarter expanded 1.5 per cent. Economists estimated 1.6 per cent growth.
CORPORATE NEWS:
Bombardier has posted a $4.9-billion (U.S.) loss for the third quarter, mostly tied to its C Series and Learjet 85 aircraft programs, and turned in operating results that were substantially below expectations that were already low. The Montreal-based company also announced that the province of Quebec will invest $1-billion in the C Series program, which is about two years behind schedule, and it's continuing to look for new investment money for its rail business.
Cenovus Energy raised its cost savings target for the year by 43 per cent, hoping to weather a steep plunge in crude prices through operating and administrative cuts and reduced capital spending. The company said on Thursday said it now expects cost savings of about $400 million this year, higher than the $280 million it forecast in July. Cenovus, which has in recent months cut capital spending and hundreds of jobs, reported a third-quarter operating loss of $28 million, or 3 cents per share. That was less than analysts average estimate of a loss of 4 cents per share, according to Thomson Reuters I/B/E/S.
Potash Corp of Saskatchewan on Thursday cut its full-year earnings forecast and said it expects to sell less potash in the year than expected due to weak demand and prices. The world's biggest fertilizer company by market capitalization reported an 11 percent drop in quarterly profit, also hurt by weak nitrogen prices and increased phosphate costs. The company lowered its full-year profit forecast to $1.55-$1.65 per share from $1.75-$1.95. Analysts on average had estimated $1.74 per share, according to Thomson Reuters I/B/E/S.
Suncor Energy late Wednesday reported a third-quarter loss due to unrealized foreign exchange losses and posted lower operating profits as the slump in global crude prices dragged on. The company reported a net loss of $376 million, or 26 Canadian cents per share. Suncor's operating profit, which excludes one-time items, fell to $410 million, or 28 Canadian cents per share, in the third quarter, from $1.306 billion, or 89 Canadian cents per share, in the year-ago period.
AltaGas reported revenue of $452 million, below the consensus estimate of $489 million. Earnings came in at 14 cents per share, below expectations of 18 cents per share.
Maple Leaf Foods reported Q3 EPS of 16 cents vs. the Street estimated 17 cents.
Goldcorp reported a Q3 adjusted loss of 4 cents a share vs. an estimated profit of 4 cents.
Mastercard reported Q3 adjusted EPS of 91 cents (U.S.) vs. the Street estimated 87 cents.
GoPro slumped 16.4 per cent in premarket trading after the action camera maker posted disappointing results.
Aetna on Thursday reported third-quarter net income of $560.1 million. The company said it had profit of $1.59 per share. Earnings, adjusted for non-recurring costs and amortization costs, came to $1.90 per share. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of $1.78 per share. The health insurer posted revenue of $14.99 billion in the period, falling short of Street forecasts.
Deutsche Bank's U.S.-listed shares were down 5.3 per cent in the premarket after the German bank announced a massive overhaul of its operations that includes 35,000 job cuts.
MGM Resorts International said it would spin off some of its real estate properties, including The Mirage, into a publicly traded company, sending its shares up 8 percent in premarket trading on Thursday. The company said it would contribute 10 of its real estate assets to the new company and that it intends to maintain control of the company.
Pharmaceutical giant Pfizer Inc has held early talks with Botox-maker Allergan Plc to discuss what could be the biggest takeover deal this year, the Wall Street Journal and Financial Times reported. Shares in Allergan jumped 11 per cent in premarket trade.
Other earnings today include: Alexion Pharmaceuticals Inc; Altagas Ltd; Avnet Inc; Brunswick Corp; Calfrac Well Services Ltd; Canadian Oil Sands Ltd; Canam Group Inc; Canfor Corp; Canfor Pulp Products Inc; Carter's Inc; Coca-Cola Enterprises Inc; Columbia Sportswear Co; ConocoPhillips; Delphi Automotive PLC; Electronic Arts Inc; Expedia Inc; Fairfax Financial Holdings Ltd; FirstEnergy Corp; Genworth MI Canada Inc; Golden Star Resources Ltd; Host Hotels & Resorts Inc; Lake Shore Gold Corp; LinkedIn Corp; New York Times Co; NexJ Systems Inc; Sherwin-Williams Co; Sirius XM Canada Holdings Inc; SolarCity Corp; Starbucks Corp; Superior Plus Corp; Teranga Gold Corp; Time Warner Cable Inc; TransAlta Renewables Inc; Trimac Transportation Ltd; Western Energy Services Corp; Western Union Co; Yamana Gold Inc
ANALYST ACTIONS:
Barclays reduced its recommendation on Pengrowth Energy to "equalweight" from "overweight" and slashed its price target to $1.50 from $2.75.
QUOTE OF THE DAY:
"Outliers are those who have been given opportunities - and who have had the strength and presence of mind to seize them." - Malcolm Gladwell
Jennifer Dowty