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Before the bell: Stocks weaken as OECD urges caution

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.

If Carl Icahn skewered Monday's stock market rally with his comments about a suspected correction, then the OECD is doing its bit to temper enthusiasm on Tuesday.

Global stocks looked set for a weak performance, with a relatively gloomy economic picture hanging over markets. The OECD is taking issue with central bank policies – including those of the Bank of Canada – and slashing its growth forecasts for this year and next. Growth in 2013 is now expected to be just 2.7 per cent, down from an earlier forecast of 3.1 per cent. Next year, growth will improve to 3.6 per cent, but that forecast is down from 4 per cent previously.

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One of the problems, as they see it, is too much stimulus, which is why the OECD is calling upon the Bank of Canada to start raising its key interest rate by the end of next year – taking it to 2.25 per cent by the end of 2015. The rate has been stuck at just 1 per cent for the past three years.

Why the need to raise rates? The OECD wants to avoid a buildup of inflationary pressures, although it is hard to see any right now: Canada's inflation numbers for October will be released later this week, and economists expect the headline year-over-year rate to rise a mere 0.9 per cent. In other words, inflation seems kind of low right now.

Within global stock markets, European stocks fell about 0.8 per cent after hitting fresh five-year highs on Monday. U.S. stock futures were largely unchanged. On Monday, the S&P 500 briefly rose above 1800 and the Dow Jones industrial average broke the 16,000-barrier, but both indexes surrendered gains near the end of trading.

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

MARKETS:

Equities:

Futures: S&P 500 -0.07 per cent; Dow +0.09 per cent; Nasdaq +0.06 per cent; S&P Toronto -0.01 per cent

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Hong Kong's Hang Seng -0.01 per cent

Shanghai composite index -0.19 per cent

Japan's Nikkei -0.25 per cent

London's FTSE 100 -0.53 per cent

Germany's DAX -0.38 per cent

France's CAC 40 -1.01 per cent

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Commodities:

WTI crude oil (Nymex Jan) -0.13 per cent at $93.56 (U.S.) a barrel

Gold (Comex Dec) +0.32 per cent at $1,276.40 (U.S.) an ounce

Copper (Comex Dec) +0.06 per cent at $3.16 (U.S.) a pound

Currencies:

Canadian dollar at 95.72 (U.S.), vs. 95.86 at Monday's North American close.

U.S. dollar index down 0.02 at 80.80

Bonds:

U.S. 10-year Treasury yield 2.68 per cent, +0.01

ECONOMIC INDICATORS:

No major economic reports scheduled.

STOCKS TO WATCH:

Sears Canada declared a special dividend of $5 per share as it reported a loss of 48 cents a share, wider than the 22 cent loss of a year ago. But its same-store sales in the third quarter saw their first quarterly rise since 2008.

Best Buy shares are down about 7 per cent in the premarket after the electronics retailer reported earnings of 16 cents a share, beating Street views, but same-store sales growth disappointed and the company warned of a price war this holiday season.

Home Depot reported earnings of 95 cents a share, beating the Street consensus of 89 cents.  The chain also lifted its full-year forecast again. Shares are up 2.3 per cent in the premarket.

Campbell Soup reported earnings of 54 cents per share, down from 78 cents per share a year earlier and missing Street expectations, and it issued an earnings warning. Shares are down 6 per cent in the premarket.

George Weston reported third-quarter adjusted EPS of $1.38 versus the $1.45 Street estimate.

Other earnings today include: The TJX Companies; United Natural Foods; Medtronic; and LaZBoy.

Bombardier has signed a letter of intent to sell five C Series jetliners to Iraqi Airways, with options for 11 more plans. The order is valued at $387-million (U.S.) at list price, but with the options, the deal would be worth $1.26-billion.

The U.S. government's auto safety watchdog has opened an investigation into battery fires in Tesla Model S electric cars. Shares in Tesla are down more than 4 per cent in the premarket.

ANALYST ACTIONS:

CIBC downgraded North American Palladium to "sector underperformer" from "sector performer" and slashed its price target to 60 cents (Canadian) from $1.40 on a need to raise cash immediately.

M Partners downgraded Toromont Industries to "hold" from "buy" on price appreciation and maintained a $26.50 (Canadian) price target.

Beacon Securities raised its price target on Easyhome to $22.50 from $18.50 and maintained a "buy" rating.

Canaccord Genuity raised its price target on Salesforce.com to $65 (U.S.) from $54 and maintained a "buy" rating. Goldman Sachs raised its price target to $65 (U.S.) from $60 and maintained a "conviction buy" rating.

Desjardins Securities cut its price target on TeraGo to $9 (Canadian) from $10 and maintained a "hold" rating.

Raymond James raised its price target on Alaris Royalty to $39.75 (Canadian) from $37 and maintained an "outperform" rating.

Raymond James raised its price target on Renegade Petroleum to $1.40 (Canadian) from $1.60 and maintained a "market perform" rating.

THIS MORNING'S TOP INVESTING LINKS:

Barron's is warning that social media and cloud-related stocks 'seem stretched to bursting.'

Don't expect any monster moves up in the market - we're now in the mature phase of a bull run.

Another reason to buy index funds.

U2 front man Bono stands to make millions when Forbes is sold.

Why Snapchat turned down Facebook's $3-billion offer.

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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
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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