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Before the bell: Stocks head toward steep drop

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.

Stock futures are suggesting a pretty steep selloff on Wall Street at today's open, although losses on the resource-heavy TSX may be muted by renewed strength in crude oil and gold. Futures for the S&P 500 are down about 0.6 per cent, but down less than 0.2 per cent for the TSX, with WTI crude retaking the $100 (U.S.) level this morning and gold trading above $1,300 (U.S.) an ounce.

Russia has returned to the forefront of the market's attention today, after the U.S. and European Union imposed sanctions on several Russian banks, energy companies and defence firms in a pressure tactic to end the country's support of Ukrainian rebels. Investors in Europe were particularly rattled by the fresh measures, given the region's dependence on Russia's energy sector. The U.S. sanctions hit companies that included natural gas producer OAO Novatek and will mean those companies will be unable to access U.S. equity or debt markets for new financing with maturities longer than 90 days. Russia's benchmark stock index fell nearly 3 per cent to a 1 1/2-month low and the ruble weakened by 1.5 per cent against the U.S. dollar, the most in four months.

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Meanwhile, with China's better-than-expected gross domestic product report for the second quarter fading into the background, the nation's debt issues have returned to the forefront of the market's attention. A building company, Huatong Road & Bridge Group, warned overnight it may miss a payment on $64-million in loans as its chairman assists authorities with an investigation. It could be the second bond default out of China this year.

Today is also a big day for U.S. earnings, which could drive overall market sentiment, especially if profits fail to meet Street expectations and heighten worries that markets have become overvalued. In Canada, CP Rail today became one of the first TSX-listed companies to report earnings; its profit largely met Street expectations.

Thomson Reuters data show that of the 45 companies in the S&P 500 that have reported earnings through Wednesday morning, 66.7 per cent have topped Wall Street expectations, roughly in-line with the 67 per cent rate for the past four quarters and above the 63 per cent rate since 1994.

We have earnings highlights and much more below.

MARKETS:

Equities:

Futures: S&P 500 -0.61 per cent; Dow -0.38 per cent; Nasdaq -0.59 per cent; S&P/TSX -0.16 per cent

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Hong Kong's Hang Seng -0.01 per cent

Shanghai composite index -0.55 per cent

Japan's Nikkei -0.06 per cent

London's FTSE 100 -0.44 per cent

Germany's DAX -0.50 per cent

France's CAC 40 -0.67 per cent

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Commodities:

WTI crude oil (Nymex Sep) +1.06 per cent at $101.67 (U.S.) a barrel

Gold (Comex Aug) +0.28 per cent at $1,303.50 (U.S.) an ounce

Copper (Comex Sep) -0.12 per cent at $3.21 (U.S.) a pound

Currencies:

Canadian dollar at 92.99 (U.S.), down 0.0010

U.S. dollar index down 0.03 at 80.52

Bonds:

U.S. 10-year Treasury yield 2.51 per cent, down 0.02

ECONOMIC INDICATORS:

U.S. initial jobless claims for last week rose to 302,000, below the 310,000 that was expected and the previous week's 304,000.

U.S. housing starts in June were 893,000 when annualized, missing expectations for 1.020 million. Building permits were 963,000, also below expectations for 1.035 million.

STOCKS TO WATCH:

Loblaw says Galen Weston will become president of the retailer as part of broader changes that shake up its management structure. Other Loblaw changes include the exit of Shoppers Drug Mart president Domenic Pilla before the end of this year. The country's largest food retailer says Mike Motz, Loblaw's executive vice-president and chief merchandising officer, will take the top position at Shoppers.

Canadian Pacific Railway reported Q2 EPS of $2.11 vs. the Street estimated $2.10. Citibank called the results "a solid beat on an operating basis" and expects shares to rise at the open.

Microsoft said it would slash 18,000 jobs from its global workforce over the next year, the majority from the integration of the Nokia unit acquired this year. The company said it will take a restructuring charge of $1.1-billion to $1.6-billion over the next four quarters.

Morgan Stanley net income attributable to common shareholders rose to $1.86 billion, or 94 cents per share, in the three months to June 30 from $802 million, or 41 cents per share, a year earlier. Results beat Street expectations and shares are up 1.6 per cent in the premarket.

Mattel shares are down 10 per cent in premarket trading after the company reported a profit of 8 cents a share, down from 21 cents a year earlier, as net sales fell 9.1 per cent.

Baker Hughes Inc, the world's third-largest oilfield services company, posted a better-than-expected profit and said it expected increased activity for the remainder of the year.

Sherwin-Williams reported Q2 EPS of $3 (U.S.) versus expectations of $2.92.

Phillip Morris International reported adjusted Q2 project of $1.41 versus expectations for $1.24.

UnitedHeath Group reported Q2 EPS of $1.42 (U.S.) vs. the Street estimate of $1.26.

Baker Hughes reported adjusted Q2 profit of 92 cents vs. expectations of 90 cents.

Other earnings today include: Colabor Group, Neptune Biotechnologies, Advanced Micro Devices, Athenahealth, Blackstone Group, Capital One Financial, Celanese, Fifth Third Bancorp, Google, IBM, Schlumberger, Sonoco Products.

ANALYST ACTIONS:

Canaccord Genuity downgraded Quebecor to "hold" from "buy" and cut its price target to $28 (Canadian) from $32, citing risks associated with the company's possible national wireless expansion through its Videotron unit.

RBC Dominion Securities downgraded Painted Pony Petroleum to "sector perform" from "outperform" with a price target of $15 (Canadian).

Euro Pacific Canada removed its "top pick" on Telus, now rating it as a "buy," citing new wireless regulatory risks. Its price target was dropped to $42 (Canadian) from $44.

Raymond James raised its price target on Canadian National Railway to $78 (Canadian) from $68 and maintained an "outperform" rating.

THIS MORNING'S TOP INVESTING LINKS:

A Bloomberg global poll found that three in five financial professionals believe the market is on the verge of a bubble or already in one.

Why practice doesn't make perfect in investing.

The parallels between July 2007 and July 2014 are unmistakable.

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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
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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