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Before the Bell: Steady stock futures, Yellen in focus

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 paused overnight. The initial flurry of moves across markets as traders realigned their positions for a Trump administration has run its course, earnings season is winding down and traders are waiting for new developments. The headwinds from a higher U.S. dollar also appear to be holding stocks back.

U.S. index futures are up 0.1 per cent this morning ‎for the Dow and S&P, and 0.3 per cent for the Nasdaq as it plays catch up. The FTSE is up 0.3 per cent while the Dax is down 0.1 per cent. Gold continues to steadily recover up 0.3 per cent while most major currencies are picking up slightly against the U.S. dollar. The retailing sector could be active again after Best Buy posted huge results, beating the Street on same-store sales and EPS by a country mile and also posting positive guidance. On the other hand, Wal-Mart barely beat the Street on earnings while same-store sales and guidance was soft heading into the big holiday season.

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Crude oil continues its big rebound today‎ with WTI up 1.4 per cent and Brent up 1.5 per cent. Traders continue to speculate on a production cut deal coming together in time for the Nov. 30 OPEC meeting, less than two weeks away now. Reports that North Dakota (shale) production fell to a two-year low may also be providing support. The International Energy Agency indicated that U.S. shale production could come back at a price of about $60 (U.S.) which is higher than the low $50s where recent rallies have been capped.

Today is the biggest day in a big week for Fed speeches. Overnight Philadelphia Fed President Patrick Harker and Cleveland Fed President Loretta Mester continued the hawkish tone pointing toward a December interest rate increase. The big question remains: how many rates may follow that in 2017? At 100.00 on the U.S. Dollar Index, the Street is pricing in four hikes next year up from 95.00 and two hikes before the election.

Today, the doves at the Fed get a chance to fight back if they want to. ‎Earlier this week St. Louis Fed President James Bullard indicated he sees one rate hike possible now and then nothing for the next two years, but he will be a non-voter over that time frame.

New York Fed President William Dudley speaks this morning, but the most important comments may come from Fed Chair Janet Yellen and Governor Lael Brainard. Ms. Yellen is scheduled to begin her testimony on the economic outlook before the congressional Joint Economic Committee at 10 a.m. ET. Despite their ties to the Democrats, neither is expected to resign -- for now at least -- but they could become a source of tension between the incoming administration and the central bank. During the campaign, Donald Trump had suggested that he would look to replace Ms. Yellen at the end of her term. Governor Brainard has been the leader of the dovish faction at the Fed, was closely linked to the Obama Administration and was reportedly a candidate for Treasury Secretary had Hillary Clinton won last week. Recall before the September meeting, she stopped speculation of a rate hike before the election dead in its tracks.  Now, we'll see if Governor Brainard is prepared to change her tune and get with the new program. We'll also see how much influence she has lost following the election and if the Street is still willing to listen to her or not. Her prepared remarks indicate she sees the Fed as moderately accommodative at the moment with the risk of falling behind the curve limited.  Her comments appear to be supportive of a December increase in interest rates but for 2017 appear to be less aggressively hawkish than the street is forecasting currently.

There has been another flurry of economic data overnight highlighted by huge U.K. retail sales numbers, showing that the U.K. economy continues to outperform following the Brexit vote despite the ongoing warnings of doom from the side that lost. Today, there are a number of middle tier reports from the U.S.. It would take a huge surprise to knock the Fed off course for December, but consumer price inflation numbers could give another indication of how much pressure is on the Fed to deliver follow on hikes in 2017.

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

MARKET DATA:

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Futures (as of about 7:30 a.m. ET)

Dow +0.06 per cent; S&P 500 +0.15 per cent; Nasdaq: +0.34 per cent; TSX 60 +0.22 per cent

Equities
Japan's Nikkei +0.00 per cent
Shanghai composite index +0.11 per cent
Hong Kong's Hang Seng -0.08 per cent 
Germany's DAX -0.21 per cent
London's FTSE +0.30 per cent
France's CAC 40 +0.08 per cent

Commodities
WTI crude oil (Nymex Dec.) 1.43 per cent at $46.22 (U.S.) a barrel
Gold (Comex Dec.) +0.42 per cent at $1,229.00 (U.S.) an ounce
Copper (Comex Dec.) -0.12 per cent at $2.48 (U.S.) a pound

Currencies
Canadian dollar +0.13 at 74.51 cents (U.S.)
U.S. dollar index -0.36 at 100.07

Bonds
Canada 10-year bond yield -0.3276 at 1.5 per cent

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KEY ECONOMIC RELEASES

Euro Area Consumer Price Index

(8:30 a.m. ET) Canada international securities transactions for September.

(8:30 a.m. ET) U.S. initial jobless claims for week of Nov. 12. Estimate is 256,000, an increase of 2,000 from previous week.

The number of people seeking U.S. unemployment benefits fell to the lowest level since 1973 last week, evidence that businesses are confident enough in the economy to hold onto their workers. The Labor Department says that applications for unemployment aid dropped 19,000 to a seasonally adjusted 235,000 last week. The four-week average, a less volatile measure, fell to 253,500.

(8:30 a.m. ET) U.S. consumer prices for October. Consensus is increases of 0.4 per cent from September and 1.6 per cent year over year. Excluding food and energy, the consensus projections are increases of 0.2 per cent and 2.2 per cent, respectively.

Rising energy costs pushed consumer prices higher in October, but overall inflation remains tame. The Labor Department says its consumer price index rose 0.4 per cent last month, the most since April and up from a 0.3 per cent increase in September. Over the past year, consumer prices are up 1.6 per cent — below the Federal Reserve's 2 per cent annual inflation target. Energy prices rose 3.5 per cent last month, led by a 7 per cent hike in gasoline prices. The cost of shelter rose 0.4 per cent on a 1.8 per cent rise in hotel rates. Food prices were unchanged for the fourth straight month. Core inflation, which strips out volatile food and energy costs, rose a modest 0.1 per cent last month and is up 2.1 per cent over the past year.

(8:30 a.m. ET) U.S. housing starts for October. Consensus is an annualized rate increase of 10.3 per cent.

U.S. housing starts surged to a more than nine-year high in October as builders ramped up construction of both single and multifamily homes, offering hope that housing will contribute to economic growth in the fourth quarter. Groundbreaking jumped 25.5 percent to a seasonally adjusted annual pace of 1.32 million units, the highest level since August 2007, the Commerce Department said on Thursday. The percent increase was the biggest since July 1982. Starts increased in all four regions last month. September's starts were unrevised at a 1.05 million-unit rate. Economists polled by Reuters had forecast housing starts rising to a 1.16 million-unit pace in October. Residential construction has been a drag on gross domestic product for two straight quarters.

(8:30 a.m. ET) U.S. building permits for October. Consensus is an annualized rate decline of 2.9 per cent.

(8:30 a.m. ET) U.S. Philadelphia Fed Index for November.

(10 a.m. ET) U.S. Fed chair Janet Yellen to testify to the joint Economic Committee on economic outlook.

(10:30 a.m. ET) Bank of Canada review

KEY STOCKS TO WATCH

Also see: Thursday's small-cap stocks to watch

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Cisco fell 3.8 percent to $30.37 in premarket trading after its current-quarter forecast fell below analysts' estimates.

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Wal-Mart Stores fell 1 percent to $70.61 after the world's largest retailer reported lower-than-expected quarterly comparable sales.

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NetApp jumped 10.9 percent to $38.50 after the data storage equipment maker's third-quarter profit forecast came in above estimates.

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Suncor Energy Inc. said it expected production to rise by more than 13 per cent next year and spending to fall by more than $1-billion. Oil producers continue to keep a tight lid on spending to cope with a 60 per cent fall in oil prices since mid-2014. Suncor set a budget for capital spending of $4.8-billion-$5.2-billion for 2017 and forecast average production of 680,000-720,000 barrels of oil equivalent per day.

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Health insurer WellCare Health Plans Inc. said on Thursday it would buy smaller rival Universal American Corp for about $600 million to expand its Medicare Advantage presence.

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Bombardier Inc. raised $1.4-billion (U.S.) in its first return to the bond market in 21 months, refinancing some debt and buying more time for its turnaround plan. The Montreal-based plane and train maker is tapping the bond market for the first time since February, 2015, in an offering led by Bank of America Merrill Lynch.

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Earnings include: Applied Materials Inc.; Best Buy Co Inc.; Gap Inc.; Helmerich and Payne Inc.; J M Smucker Co.; Rogers Sugar Inc.; Salesforce.com Inc.; Spectrum Brands Holdings Inc.; Staples Inc.; Tembec Inc.; Wal Mart Stores Inc.; Williams-Sonoma Inc.

With files from wire services, cnbc.com, marketwatch.com

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