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Before the bell: Markets see red as budget concerns grow

The Before the Bell report is constantly updated to reflect the latest news developments and market moves in the premarket. Check back later for updates.

The ongoing budgetary battle in Washington is keeping traders cautious about stepping up their exposure to equities this morning, with North American stock futures drifting a little lower and overseas markets mostly in the red.

While the S&P 500 rallied one week ago after the Federal Reserve's surprising announcement that it's putting any bond-buying "tapering" on the backburner, it's been downhill ever since, with the benchmark index now down four trading days in a row.

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Blame the lack of progress in Congress over spending cuts and negotiations to raise the debt ceiling. A Senate vote is scheduled for later today on a motion that would allow the government to keep running beyond the end of the month when budgets are due to expire. But Republicans and Democrats have yet to find common ground on a longer-term solution.

There were some ominous words Tuesday from U.S. Treasury Secretary Jacob J. Lew, who said investor confidence that a debt-ceiling deal can be struck to raise the debt limit is "a bit greater than it should be."

President Barack Obama is refusing to negotiate with Republicans in Congress on raising the $16.7-trillion debt ceiling. The consequences of not reaching a deal could be worst than a government shutdown, Moody's Investors Service pointed out Tuesday, as it would bring the highest risk of government default on its debt. That would roil markets and no doubt damage business and consumer confidence.

Moody's, and most market observers, expect deals in Washington to eventually get done given the consequences if they don't. But the political brinkmanship doesn't exactly provide an environment in which investors want to increase equity exposure - particularly as the major indexes trade just below record highs and valuations, to some, seem on the high side.

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



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Futures: S&P 500 -0.19 per cent; Dow -0.14 per cent; Nasdaq -0.11 per cent; S&P Toronto -0.08 per cent

Hong Kong's Hang Seng +0.13 per cent

Shanghai composite index -0.39 per cent

Japan's Nikkei -0.76 per cent

London's FTSE 100 -0.20 per cent

Germany's DAX -0.27 per cent

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France's CAC 40 -0.35 per cent


WTI crude oil (Nymex Nov) +0.55 per cent at $103.71 (U.S.) a barrel

Gold (Comex Dec) +0.45 per cent at $1,322.10 (U.S.) an ounce

Copper (Comex Dec) +0.40 per cent at $3.27 (U.S.) a pound


Canadian dollar at 96.98 (U.S.), down 0.0008 from yesterday's North American close.

U.S. dollar index down 0.14 at 80.41


U.S. 10-year Treasury yield 2.65 per cent, down 0.01


U.S. durable goods orders rose 0.1 per cent in August after plunging in July. Economists had forecast a 0.5 per cent drop from the prior month. Excluding the transportation sector, durable goods orders fell 0.1 per cent.

(10 a.m. ET) U.S. releases new home sales for August, forecast to rise to an annualized clip of 425,000 from July's 394,000.

STOCKS TO WATCH: Inc. announced a new version of its Kindle Fire tablet. Shares are up 0.3 per cent in the premarket.

AutoZone shares are down 0.5 per cent in the premarket after the largest U.S. auto parts retailer reported a 15 per cent rise in quarterly profit.

Other earnings today include HB Fuller Co.


Canaccord initiated coverage on Facebook with a "buy" rating and $60 U.S. target.

Morgan Stanley downgraded Carnival Corp. to "underweight" from "equalweight" and Merrill Lynch downgraded the stock to "neutral" from "buy." JPMorgan cut its price target to $32 from $34 but maintained a "neutral" rating.

Goldman Sachs removed Dollar Tree from its "conviction buy" list but raised its price target to $65 (U.S.) from $61.

Desjardins Securities initiated coverage on Saputo Inc. with a "buy" rating and $53 (Canadian) price target.

Raymond James downgraded Trican Well Service to "market perform" from "outperform" and cut its price target to $16.50 from $18.

Raymond James downgraded Trinidad Drilling Ltd. to "outperform" from "strong buy" but raised its price target to $11.75 from $11.25.

Macquarie upgraded Nordstrom to "outperform" from "neutral" and raised its price target to $66 (U.S.) from $60.


Why Wall Street couldn't say "sell" on BlackBerry.

Americans are losing faith in the nation's economic recovery even as forecasters expect growth to accelerate.

How not to prepare for a bear market in bonds.

How much it costs Apple to build new iPhones.

Why the U.S. commercial real estate crash never came.

Why Twitter may not be so 'new media' after all.


For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More


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