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Inside the Market Before the Bell: Apple buoys tech futures while Wall Street struggles; oil prices weigh on TSX

Equities

U.S. stock futures were mixed early Wednesday as investors await the outcome of the two-day Federal Reserve meeting. Dow and S&P 500 futures struggled early on but a solid showing from Apple in its latest earnings report helped bolster the tech-heavy Nasdaq heading into the session. TSX futures were weaker as oil prices slid on a report showing a surprise build in U.S. crude inventories.

Overnight, world markets were weaker with trade concerns again entering the fray. Varied reports on the state of trade between the United States and China injected a degree of uncertainty into the market. Bloomberg reported Tuesday that the two countries were looking to resume talks in a bid to head off a row over import tariffs. However, a second report suggested the Trump administration plans to propose an increase to tariffs on US$200-billion in Chinese import.

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“Despite the impressive numbers from Apple, sentiment dropped like stone as reports that the U.S. is considering increasing its 10-per-cent tariffs on US$200-billion of Chinese imports, to a 25 per cent tariff,” Jasper Lawler, head of research at London Capital Group, said in an early note. “U.S. and European futures, with the exception of the Nasdaq, are pointing to a weaker start to trading on Wednesday.”

In premarket trading, Apple shares were up more than 3 per cent. After Tuesday’s close, the tech giant reported that earnings per share grew by 40 per cent and revenue rose by 17 per cent on an annual basis to US$53.3-billion, topping Wall Street forecasts. The company also said it shipped 41.3 million iPhones in the third quarter. That was near the number seen in the year earlier period but the addition of the iPhone X saw the average sales price rise. Apples gain come after a rout among the so-called FAANG (Facebook, Apple, Amazon, Netflix and Google-parent Alphabet) stocks with Facebook most recently cratering last week on disappointing user numbers. Those figures along side a sharp drop in Twitter stock last week saw the Nasdaq lose about 4 per cent across three trading days.

Mr. Lawler noted that Apple’s premarket gains now set the stage for the company to become the first with a US$1-trillion market cap.

On Bay Street, earnings continue. Torstar Corp., Aphria Inc., Encana Corp and Tim Hortons parent Restaurant Brands International all report before the start of trading.

Also on this side of the border, Molson Coors Canada, this country’s second biggest brewer by volume, is moving into the cannabis sector, agreeing to partner with Quebec-based Hydopothecary Corp. to launch a new joint venture to develop cannabis-infused beverages. Molson Coors also reports earnings later in the day.

South of the border, the Fed’s next rate decision comes into focus this afternoon after the central bank’s Federal Open Market Committee ends its two-day meeting. The Street isn’t expecting a rate hike this time around, but investors will be watching for signals about future increases. Right now, economists expected two or three more rate hikes before the end of the year.

Wall Street also gets Tesla results after the close of trading.

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Overseas, the pan-European STOXX 600 was down 0.34 per cent. Shares of Air France-KLM were among the winners with shares rising more than 6 per cent on an earnings beat. Britain’s FTSE 100 was down 1.08 per cent just after 6:30 a.m ET. France’s CAC 40 was little changed and Germany’s DAX was down 0.19 per cent.

In Asia, Japan’s Nikkei rose 0.86 per cent helped by a weaker yen. Trade concerns weighed on the Shanghai Composite Index, which finished down 1.81 per cent. Hong Kong’s Hang Seng ended off 0.85 per cent.

Commodities

Crude prices were down ahead of the North American open after a report from the American Petroleum Institute showed a surprise jump in U.S. crude inventories. Both Brent and West Texas Intermediate were down nearly 1 per cent around dawn. The day range on Brent so far is US$73.15 to US$74.12. WTI has a range for the day of US$67.89 to US$868.52.

“Oil prices have slipped again this morning pressured by a market report yesterday that U.S stockpiles of crude rose unexpectedly and by higher OPEC production, adding to indications of abundant supply,” OANDA analyst Dean Popplewell said in a note.

Late Tuesday, the API reported that weekly inventories rose 5.6 million barrels. Analysts had been looking for a decrease closer to 2.8 million. Markets are now awaiting the morning release of more official figures for the same week from the U.S. Energy Information Administration. The EIA report is expected to show a weekly decline in inventories of about 2.4 million barrels.

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Rising OPEC supply has also hampered sentiment this week.

OPEC production was higher in June, led by Saudi Arabia, and touched a high for the year in July, according to Reuters survey released Monday. The survey also noted that declines from Iran, in the face of U.S. sanctions, and other producers put a ceiling on the supply increase.

In other commodities, gold prices were weaker as the U.S. dollar advanced ahead of the Fed statement. Spot gold was down about 0.2 per cent at last check at US$1,220.77 an ounce. Gold had been slightly higher Tuesday on a more muted greenback. Gold futures were also lower early Wednesday.

Silver and platinum prices were also down.



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Currencies and bonds

The Canadian dollar was slightly weaker against its U.S. counterpart as the greenback found its footing ahead of the afternoon Fed rate decision. The loonie has been moving in a narrow range for the day so far of 76.73 US cents to 76.89 US cents. Trade issues are also weighing on currency markets with the Chinese yuan falling on reports that the U.S. could increase import tariffs to 25 per cent on US$200-billion in Chinese goods. Working in the loonies favour were reports that Mexico’s incoming president remains optimistic about the possibility of a NAFTA deal in the near future.

On Tuesday, the loonie rose to a seven-week high on news that the Canadian economy had outperformed in May, growing by 0.5 per cent for the month.

On broader currency markets, the U.S. dollar was higher against a group of world counterparts, edging up to 94.5900. On the day’s trade news, the U.S. dollar gained more than half a percentage point against China’s yuan to as high as 6.8458 yuan. Reuters notes that that is close to its recent peak of 6.8562. The news agency also noted that that the Australian dollar, seen as a proxy for Chinese growth because of Australia’s big export sectors, fell 0.3 per cent. The euro was also slightly weaker against the U.S. dollar.

In bonds, the yield on the U.S. 10-year note breached the key 3-per-cent level after a report showed private hiring was better than expected in June. Shortly after the release of the ADP report, yields on the 10-year note touched 3.001 per cent before pulling back slightly.

Stocks set to see action

Brookfield Infrastructure will buy home services company Enercare Inc. for $29 a share, putting the value of the deal at $4.3-billion including debt. Enercare says the transaction has the unanimous support of that company’s board.

Encana Corp. recorded a $151-million net loss in the second quarter linked to its risk management program but says it did better than last year by most other financial measures. The Calgary-based company said the net loss was equal to 16 cents per share and compared with a year-earlier net profit of $331-million or 34 cents per share. Excluding unrealized losses from its hedging program, which is designed to offset the impact of low oil prices, Encana’s financial performance improved from last year’s second quarter. Operating earnings grew 10 per cent to $198-million, which was ahead of analyst estimates from Thomson Reuters Eikon.

Torstar Corp. reported profit attributable to shareholders of $4.8-million in the latest quarter, compared to a loss of $7-million in the same period a year earlier. On a per-share basis, net income was 6 cents in the most recent quarter, compared with a loss of 9 cents the year before. Adjusted earnings per share totalled 16 cents a share, compared with a loss of 3 cents last year. Revenue was down 11.5 per cent to $143.2-million in the second quarter from $161.7-million a year earlier.

Fast-food chain Restaurant Brands International Inc posted an 89-per-cent rise in second-quarter profit, helped by improving sales at its Tim Hortons chain. Net income attributable to shareholders in the company, which also owns the Burger King chain, rose to $169.1-million, or 67 cents per share, in the three months ended June 30 from $89.5-million, or 37 cents per share, a year earlier. Revenue came in at $1.14-billion, compared with $1.13-billion a year earlier.

Chesapeake Energy Corp reported a loss compared to a year-ago profit on Wednesday, as a slump in natural gas prices ate into its margins and the company was hurt in part by a $46-million impairment charge. The Oklahoma-based company said net loss available to shareholders was US$40-million, or 4 US cents per share, in the three months ended June 30, compared with a profit of US$470-million, or 47 US cents per share, a year earlier.

Facebook officials say they have identified a co-ordinated political campaign to manipulate voters ahead of U.S. elections this fall, including fake accounts that helped organize a protest in Washington, and suspicious American political issue ads paid for in Canadian dollars. The social-media giant said it had removed 32 pages and profiles that appeared to be orchestrating efforts to inflame the political debate around divisive social issues, such as immigration, ahead of the November midterm vote, The Globe’s Tamsin McMahon reports.

U.S. wireless carrier Sprint Corp on Wednesday reported a 16-per-cent fall in first-quarter profit, as it ramped up spending to attract more subscribers. Net income fell to US$173-million, or 4 US cents per share, in the quarter ended June 30, compared with US$206-million, or 5 US cents per share, a year earlier.

More reading:

Wednesday’s analyst upgrades and downgrades

Wednesday’s small-cap stocks to watch

Economic news

Payroll company ADP said private hiring by U.S. firms rose by 219,000 in July, topping economists forecasts which called for an increase of about 185,000.

(2 p.m. ET) U.S. Federal Reserve interest rate announcement.


With Reuters and The Canadian Press












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