Canada’s main stock index edged up early Friday helped by gains in energy and industrial stocks. On Wall Street, key indexes started in the red with traders looking ahead to next week’s rate decision by the Federal Reserve.
At 9:34 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 20.41 points, or 0.1 per cent, at 20,543.05.
In the U.S., the Dow Jones Industrial Average fell 28.73 points, or 0.08 per cent, at the open to 33,797.43. The S&P 500 opened lower by 5.72 points, or 0.14 per cent, at 4,129.63, while the Nasdaq Composite dropped 24.69 points, or 0.20 per cent, to 12,117.54 at the opening bell.
“Traders know that the U.S. economy is experiencing a difficult time, and it is pretty much a given that the Fed is going to increase the interest rate by another 25 basis points. This means that earnings are going to be adversely influenced further in the coming quarter, and the US economy will face further slowdown,” Naeem Aslam, chief investment officer with Zaye Capital Markets, said.
The Fed’s next rate decision is due on May 3. On Friday morning, new figures showed the U.S. core personal consumption expenditure index, a key measure of inflation for the Fed, rose by 0.3 per cent in March, in line with market forecasts. On an annual basis, the core PCE index was up 4.6 per cent, slightly ahead of economists’ expectations, and above the Fed’s 2-per-cent target rate.
Shares of Amazon were down more than 3 per cent in early trading despite posting initial gains in the immediate wake of the company’s latest results. Amazon’s profit and revenue topped market forecasts in the latest quarter, but concerns about cloud growth tempered investor enthusiasm. The company said cloud customers were continuing to try to trim their bills meaning revenue growth rates were about 5 percentage points lower in April than in the first quarter, Reuters reported.
In Canada, investors got a reading on the health of the broader economy. Statistics Canada says GDP grew by 0.1 per cent in February on a monthly basis. Early estimates from Statscan had suggested growth for the month of 0.3 per cent. Economists had been forecasting growth around 0.2 per cent in February. The agency also said it now estimates that GDP contracted by 0.1 per cent in March. Preliminary estimates from Statscan suggest the economy grew at an annual rate of 2.5 per cent in the first quarter of the year.
“For Q1 as a whole, the 2.5-per-cent growth rate is very close to the 2.3 per cent forecast that the Bank of Canada had in its April Monetary Policy Report, and as such today’s data shouldn’t change the narrative of policymakers,” CIBC senior economist Andrew Grantham said.
“Until there are clearer signs that slowing growth is also helping to ease core inflation, the Bank of Canada will continue to lean towards raising interest rates, even if a hike is not ultimately needed, with rate cuts not coming until 2024.”
In earnings, energy companies Imperial Oil and TC Energy both released results ahead of the start of trading.
Pipeline operator TC Energy beat analysts’ estimates for first-quarter profit on Friday as elevated energy prices boosted demand. The Calgary-based company reported comparable earnings of $1.21 a share for the three months ended March 31. Analysts on average had expected earnings of $1.15 per share, according to Refinitiv data.
Imperial Oil, meanwhile, reported net income of $1.25-billion, or $2.13 per share, for the quarter ended March 31, from $1.17-billion, or $1.75 per share, a year earlier.
Overseas, the pan-European STOXX 600 was up 0.02 per cent by midday. Britain’s FTSE 100 was flat. Germany’s DAX rose 0.09 per cent while France’s CAC 40 slid 0.55 per cent.
In Asia, Japan’s Nikkei rose 1.4 per cent after the Bank of Japan kept monetary policy steady. Hong Kong’s Hang Seng added 0.27 per cent.
Crude prices firmed but were on track for a second week of declines after a weaker-than-expected reading on U.S. economic growth in the first quarter raised concerns about demand.
The day range on Brent was US$77.70 to US$79.22 in the early premarket period. The range on West Texas Intermediate was US$73.97 to US$75.51.
Both benchmarks are down more than 3 per cent for the week so far.
Figures released by the U.S. Commerce Department on Thursday showed the U.S. economy grew at an annual rate of 1.1 per cent in the first quarter. Economists had been expecting a reading of about 2 per cent for the period. In the fourth quarter, the U.S. economy grew by 2.6 per cent.
“The economy is heading towards a rough patch, but it might still have another good quarter left before a recession starts,” OANDA senior analyst Ed Moya said.
“The crude demand outlook is all over the place given the economy is hitting stall speed, while airliners still remain optimistic for a busy summer travel period.”
He said crude should find support above US$70 a barrel, citing the OPEC+ group’s low production levels, the fact that the U.S. will eventually have to refill the Strategic Petroleum Reserve and Europe’s improving growth forecast.
Gold meanwhile, looked set for a second monthly gain in April as economic worries enhance the metal’s safe-haven appeal.
Spot gold edged 0.2 per cent lower to US$1,983.89 per ounce early Friday morning, but was up about 1 per cent for the month. U.S. gold futures eased 0.2 per cent to US$1,995.30.
The Canadian dollar was weaker as its U.S. counterpart advanced against world currencies ahead of next week’s Fed rate decision.
The day range on the loonie was 73.16 US cents to 73.58 US cents in the early premarket period. The Canadian dollar is down about 1 per cent over the past month.
On world markets, the U.S. dollar index gained 0.5 per cent to 101.93, rebounding from a near two-week low struck on Wednesday, Reuters reported.
The index is down nearly 0.8 per cent for the month after falling more than 2 per cent in March.
The euro fell 0.4 per cent to US$1.10986, but remained near its recent one-year high after German first-quarter growth came in weaker than expected, according to figures from Reuters.
In bonds, the yield on the U.S. 10-year note was lower at 3.467 per cent in the predawn period.
More company news
Exxon Mobil Corp on Friday reported a record first-quarter profit that was more than double from a year ago and topped Wall Street estimates as rising oil and gas output overcame a pullback in energy prices from high levels. Oil companies are riding that wave of relatively higher oil and gas prices with earnings benefiting from strong demand and cost-cutting tied to efforts to counter COVID-19 lockdowns three years ago. “We delivered a first-quarter record despite the fact that energy prices and refining margins are softening a bit,” Chief Financial Officer Kathryn Mikells said in an interview. -Reuters
Chevron Corp beat market expectations on Friday as profit nudged higher in the first-quarter, with earnings from refining compensating for a slide in energy prices and in oil and gas production. Net profit climbed 5% to $6.57 billion or $3.46 per share. That compares with a Wall Street consensus for flat profit at $3.38 per share, according to figures compiled by Zacks Investment Research. -Reuters
(8:30 a.m. ET) U.S. personal spending for March.
(8:30 a.m. ET) U.S. Core PCE Price Index for March.
(8:30 a.m. ET) U.S. Employment Cost Index for Q1.
(9:45 a.m. ET) U.S. Chicago PMI for April.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for April.
With Reuters and The Canadian Press