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Before the Bell: Stocks set to rise on strong earnings

The Before the Bell report is compiled by editors of The Globe and Mail and is updated throughout the morning to reflect latest developments. Colin Cieszynski, Chartered Financial Analyst and Chartered Market Technician, is chief market strategist with CMC Markets.

Stock markets have roared back to life overnight breaking their doldrums. U.S. index futures are up 0.5 per cent for the Dow and at least 0.6 per cent for the S&P and the Nasdaq. Overseas markets have been even stronger with the Hang Seng up 1.5 per cent, the Dax up 1.2 per cent and the FTSE up 1.2 per cent.

Two ‎factors have combined to drive stocks higher today. First, earnings reports continue to come in stronger than expected. Netflix earnings per share were double what the Street was expecting and IBM also posted a strong report, driving technology stocks higher. Tech may remain in focus through the day with Intel and Yahoo scheduled to report after the close.

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Second, the U.S. dollar has started to slide a bit, lifting the lid off stocks. Inflation rose more than expected in the U.K. and New Zealand making it less likely the Bank of England or the Royal Bank of New Zealand may try to cut rates again this year. This shift to neutrality makes the hawkish Fed less lonely and further indicates the recent round of stimulus may be near an end.

Sterling has popped for a penny on the U.K. inflation figures and appears to be recovering. Meanwhile, resource dollars have been rallying too with the Canadian, Australian and New Zealand dollars all posting sizeable gains on the day. The Bank of Canada is expected to confirm it's neutral stance at Wednesday's meeting.

Crude oil is trading up slightly with West Texas Intermediate still bouncing around $50. Commodities, resource stocks and resource currencies may be active between American Petroleum Institute oil inventories and key economic reports from China, which include third-quarter GDP, industrial production and retail sales.

Now, here is a closer look at what's going on this morning and what is still to come.

MARKET DATA:

Futures (as of about 8:30 a.m. ET)

Dow +0.51 per cent; S&P 500 +0.62 per cent; Nasdaq: +0.77 per cent; TSX 60 +0.30 per cent

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Equities
Japan's Nikkei +0.38 per cent
Shanghai composite index +1.38 per cent
Hong Kong's Hang Seng +1.55 per cent 
Germany's DAX +1.18 per cent
London's FTSE +1.19 per cent
France's CAC 40 +1.39 per cent

Commodities
WTI crude oil (Nymex Nov.) +0.98 per cent at $50.43 (U.S.) a barrel
Gold (Comex Dec.) +0.48 per cent at $1,262.60 (U.S.) an ounce
Copper (Comex Dec.) +0.14 per cent at $2.11 (U.S.) a pound

Currencies
Canadian dollar +0.38 at 76.49 cents (U.S.)
U.S. dollar index -0.15 at 97.75

Bonds
Canada 10-year bond yield +0.4722 at 1.22 per cent

KEY ECONOMIC RELEASES

United Kingdom CPI and producer prices

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(8:30 a.m. ET) Canada manufacturing sales and new orders for August. Estimates are increases of 0.1 per cent and 1.0 per cent, respectively, from July.
(8:30 a.m. ET) U.S. CPI for September. Consensus is an increase of 0.3 per cent from August and 1.5 per cent year over year. For Core CPI, the consensus projections are 0.2 per cent and 2.3 per cent.
(4 p.m. ET) U.S. net treasury international capital flows for August.

KEY STOCKS TO WATCH

Goldman Sachs reported earnings of $4.88 (U.S.) a share, much higher than the $3.82 expected by the Street. Its shares jumped 1.5 per cent in premarket trading.

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Late Monday, Netflix reported strong international subscriber growth and posted a better than expected outlook. Its quarterly earnings easily topped expectations, with sales surpassing the $2-billion mark. Earnings came in at 12 cents per share, double what analysts had expected. Its shares were up 20 per cent in after hours trading Monday and were up 19 per cent in premarket trading Tuesday.

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IBM fell 2.6 per cent after reporting its 18th straight quarter of revenue decline, attracting a flurry of price target cuts from brokerages.

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Intel, scheduled to report after markets close, was up 1.7 per cent on a Barclays upgrade.

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Johnson & Johnson posted a 27 per cent jump in third-quarter profit, as restrained spending and soaring prescription drug sales more than offset a dip in consumer health sales. The world's biggest maker of health care products handily beat Wall Street's expectations and raised the lower end of its 2016 profit forecast. The maker of Band-Aids, medical devices and biologic drugs such as psoriasis treatment Stelara on Tuesday reported net income of $4.27 billion, or $1.53 per share. That's up from $3.36 billion, or $1.20 per share, in 2015's third quarter. Adjusted for amortization costs and other one-time items, earnings amounted to $1.68 per share. That was 3 cents better than the average estimate of 12 analysts surveyed by Zacks Investment Research. Its shares were up 0.26 per cent in premarket trading.

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UnitedHealth Group hiked its 2016 earnings forecast again after its profit swelled 23 per cent to nearly $2 billion in the third quarter, helped by gains both in and outside its core insurance business. The nation's biggest health insurer now expects adjusted, full-year earnings of about $8 per share, up from its previous forecast of $7.80 to $7.95 per share. Wall Street had been projecting per-share earnings of $7.93, according to FactSet, and the company's stock rose 2.13 per cent before the opening bell Tuesday.

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Domino's Pizza Inc. on Tuesday reported a bigger-than-expected 17 per cent jump in quarterly revenue as its U.S. division overcame intense competition that is taking a bite out of industry sales. Sales at domestic franchise units open at least one year were up 12.9 per cent in the third quarter ended Sept. 11. Analysts had expected a rise of 9.4 per cent, according to polling firm Consensus Metrix. Its shares were up 3.33 per cent in premarket trading.

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BlackRock reported adjusted quarterly profit of $5.14 per share, 14 cents above estimates, with revenue essentially in line. It shares were up marginally in premarket trading.

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Motorcycle maker Harley-Davidson matched forecasts with quarterly profit of 64 cents per share, and also maintained its motorcycle shipment forecasts for the year.However, its shares fell 1.4 per cent in premarket trading.

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Chipotle Mexican Grill was downgraded by Raymond James to "underperform" from "market perform," saying the restaurant chain's lost sales stemming from last year's E. coli scare may be permanent. Its shares fell 0.4 per cent in premarket trading.

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United Continental came in five cents ahead of estimates with adjusted quarterly profit of $3.11 per share, with revenue very slightly exceeding Street forecasts.

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Visa chief executive officer Charles Scharf will step down on Dec. 1. He will be replaced by former American Express President and current Visa director Alfred Kelly. Its shares were down 0.85 per cent in premarket trading.

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Earnings include: BlackRock Inc.; Charles Schwab Corp.; Comerica Inc.; Domino's Pizza Inc.; Goldman Sachs Group Inc.; Harley-Davidson Inc.; Intel Corp.; Interactive Brokers Group Inc.; Johnson & Johnson; Kansas City Southern; Omnicom Group Inc.; Philip Morris International Inc.; Yahoo! Inc.

See also: Tuesday's small-cap stocks to watch

With files from wire services

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