Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.
Equities
Canada’s main stock exchange opened lower Friday as a drop in oil prices hit energy shares. Wall Street started relatively flat on mixed details in a stronger-than-expected headline reading on first-quarter economic growth. Disappointing results from Intel Corp. weighed on tech shares.
At 9:35 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was down 33.26 points, or 0.2 per cent, at 16,542.84.
Seven of the index’s 11 major sectors were lower, led by a 1.5-per-cent fall in energy sector. Early market action suggested the TSX could end a four-week rally.
The Dow Jones Industrial Average fell 7.46 points, or 0.03 per cent, at the open to 26,454.62. The S&P 500 opened lower by 0.36 points, or 0.01 per cent, at 2,925.81. The Nasdaq Composite dropped 18.40 points, or 0.23 per cent, to 8,100.28 at the opening bell.
Overseas, European markets started slightly lower and Asia struggled with worries about the possibility of a pullback in stimulus in China weighing.
“Earnings is very much front of mind right now, with central banks around the world having adopted a far more dovish approach in anticipation of a slowdown and some countries in Europe either in or bordering on recession,” OANDA analyst Craig Erlam said. “The U.S. has got things off to a strong start against quite low expectations which has lifted equity markets there into record closing territory.”
Ahead of the open, the U.S. Commerce Department said the U.S. economy grew at an annual rate of 3.2 per cent in the first quarter. The market had been looking for a number just above 2 per cent. The first quarter gains, however, came from trade and inventories, suggesting that the three-month gain could be temporary.
Wall Street earnings on Friday include Chevron, Exxon Mobil and American Airlines. On Bay Street, Exxon-owned Imperial Oil and Husky Energy both report.
Husky Energy posted a 32-per-cent increase in quarterly profit on higher prices and improved margins. Net income rose to $328-million, in the first quarter ended March 31, from $248-million, a year earlier. Excluding items, the company earned 31 cents a share beating analysts’ estimate of 17 cents per share, according to IBES data from Refinitiv. Husky shares were higher in early going.
Amazon shares were up more than 1 per cent in early trading after the online retail giant posted first-quarter profit far ahead of market forecasts. Amazon’s first-quarter net income more than doubled to US$3.6-billion. Analysts were only expecting US$2.4-billion, according to IBES data from Refinitiv. Market reaction to the results was tempered somewhat by a softer second-quarter sales forecast. Amazon now expects net sales of between US$59.5-billion and US$63.5-billion. Analysts’ estimates were looking for second-quarter sales of US$62.37-billion. In the report, Amazon also indicated more spending was likely as it moves to change its Prime membership program to one-day shipping.
Intel stock fell 9.9 per cent after the company cut its full-year revenue forecast and missed quarterly sales estimate for its key data center business.
Outside earnings, reports Friday say Canadian dairy company Saputo Inc. will purchased the Australian cheese business of Japan’s Kirin Holdings for about 20 billion yen ($179-million). The news was reported by Japan’s Nikkei business paper, citing sources. Saputo shares were down slightly at the open in Toronto.
Overseas, shares of Glencore PLC fell the most in four months on news that U.S. regulators are investigating whether the miner broke rules through “corrupt practices.” After Thursday’s close, Glencore said the U.S. Commodity Futures Trading Commission is investigating whether the company and its units have violated some provisions of the Commodity Exchange Act and/or CFTC Regulations. Glencore also said that the investigations had a similar scope in terms of subject matter as the ongoing investigation by the U.S. Department of Justice, according to a Reuters report.
In Europe, the day started weaker but slowly steadied as the morning progressed. The pan-European STOXX 600 had been negative in the predawn hours but had managed to perk up somewhat, rising 0.04 per cent at last check. Resource stocks were weighing on European markets following Glencore’s disclosure of the U.S. investigation.
Britain’s FTSE 100 was off 0.22 per cent. Germany’s DAX edged up 0.11 per cent. France’s CAC 40 gained 0.14 per cent.
In Asia, markets in mainland China ended the week on a down note. The Shanghai Composite Index dropped 1.2 per cent. Hong Kong’s Hang Seng, meanwhile, rose 0.19 per cent. In Japan, the Nikkei lost 0.22 per cent. The Topix slid 0.15 per cent. Japanese markets now head into a lengthy public holiday that will see markets in that country shuttered until May 6.
Commodities
Crude prices were weaker early Friday and were at risk of halting a long run of weekly gains.
Brent crude was moving in a day range so far of US$72.62 to US$74.42. West Texas Intermediate had a range of US$63.85 to US$65.18. Early on, it looked like both WTI and Brent record weekly gains - the eight for WTI and the fifth for Brent - but Friday’s declines put those increases at risk.
“Oil prices are spending a third day in the red, coming off the highs that were reached earlier in the week after the U.S. announced it would not extend waivers on oil imports from Iran, which had previously been afforded to eight countries,” Mr. Erlam said. “This was an unexpected development and triggered another rally in oil prices as traders weighed up the impact of up to a million barrels of oil disappearing, clearly not buying the line that the U.S, Saudi Arabia and UAE would fill the gap.”
U.S. inventory figures this week have also put some pressure on prices with both the American Petroleum Institute and the U.S. Energy Information Administration reporting bigger-than-expected weekly builds.
“Still, both WTI and Brent remain in a good position, although they are looking a little overstretched to the upside at this point,” Mr. Erlam noted. "The last couple of peaks have come amid slowing momentum which is typically a red flag and may indicate a correction in prices. "
Elsewhere, gold prices pushed higher for a third session and appeared set for a weekly gain. Earlier in the week, gold hit its weakest level in four months, hit by a rising U.S. dollar.
“We’re trading slightly above US$1,280 at the minute and if we end the week above here, bulls may be encouraged,” Mr. Erlam said in note. “That said, until we break above US$1,310, we remain in a downtrend and while $1,280 would be a quick blow to gold bears, it doesn’t change this fact. US$1,260 remains a key support level to the downside.”
At last check, spot gold was up 0.4 per cent at US$1,281.67 per ounce, after earlier hitting its highest since April 16 at US$1,282.98.
Currencies and bonds
The Canadian dollar continued to languish just above the 74-US-cent mark and, with no major Canadian economic reports on the docket, movement for the day will likely be driven by broader currency markets. The day range on the loonie so far is 74.09 US cents to 74.27 US cents.
Key for currency markets was the premarket release of first-quarter GDP numbers, which showed growth nearly a full percentage point above forecast, although the report’s mixed details caused some concern on currency markets.
“The composition of growth isn’t particularly solid,”RBC senior economist Nathan Janzen said. " More than half of the headline 3.2-per-cent GDP gain came from a lumpy surge in net exports and a build in inventories – neither of which is likely to be repeated any time soon."
The U.S. dollar index, which weighs the greenback against a basket of currencies, fell 0.14 per cent to 98.064 on the underlying concerns. The Canadian dollar firmed somewhat against the U.S. dollar following the report, moving toward the higher end of the day range.
U.S. Treasury yields whipsawed following Friday’s report, as the strong headline figure was tempered with news of weak inflation and consumer spending. The two-year yield, a proxy for investor expectations of interest-rate hikes, fell 3 basis points, last at 2.30 per cent, according to Reuters.
Stocks set to see action
Imperial Oil Ltd slashed its 2019 spending forecast on Friday, after its net income nearly halved in the first quarter due to extreme cold weather, production cuts enforced by Alberta’s government and weak refining margins. The company said it now expects to spend between $1.8-billion and $1.9-billion, down from its previous outlook of $2.3-billion to $2.4-billion. Imperial, majority owned by Exxon Mobil Corp, said net profit fell to $293-million, or 38 cents, in the quarter ended March 31, from $516-million, or 62 cents, a year earlier. It also raised its second quarter dividend by 16 per cent to 22 cents per share.
Chip maker Intel Corp forecast current-quarter revenue below analysts’ estimates and cut full-year outlook on Thursday, sending its shares down 7 percent and sparking worries that an industry-wide slowdown could persist until the end of 2019. The company cut its 2019 revenue forecast to US$69-billion, from the US$71.5-billion it told investors to expect when it last reported earnings in January.
Starbucks Corp raised its full-year profit forecast and beat Wall Street estimates for quarterly same-store sales in results released after Thursday’s close. Net earnings attributable to the company rose to US$663.2-million, or 53 US cents per share, in the second-quarter ended March 31, from US$660.1-million, or 47 US cents per share, a year earlier. Excluding certain items, the company earned 60 US cents, 4 US cents more than the estimate.
Ford Motor Co on Thursday posted a better-than-expected first quarter largely due to strong pickup truck sales in its core U.S. market and said it was more confident in its forecast 2019 would bring better results than last year. Ford posted a quarterly net profit of US$1.15-billion or 29 US cents per share, down 34 per cent from US$1.74-billion or 43 US cents per share a year earlier. Excluding one-time items, Ford earned 44 US cents per share, above analyst estimates of 27 US cents, according to IBES data from Refinitiv. Shares were up more than 8 per cent in early trading on the results.
American Airlines Group Inc cut its 2019 profit forecast on Friday, saying it expected to take a US$350-million hit from the grounding of Boeing’s 737 MAX planes after canceling 1,200 flights in the first quarter. The company said it now expects its 2019 adjusted profit to be between US$4.00 per share and US$6.00 per share. Analysts on average had expected 2019 earnings of $5.63 per share, according to Refinitiv data.
Ride-hailing company Uber Technologies Inc unveiled terms for its initial public offering on Friday, telling investors it would seek to sell as much as US$10.35-billion in stock at a valuation of up to US$91.5-billion. In a regulatory filing, Uber set a target price range of US$44-$50 per share for its IPO. The company will sell 180 million shares in the offering, with a further 27 million sold by insiders. In the filing, Uber also reported a net loss attributable to the company for the first quarter of 2019 of around US$1-billion and revenues of roughly US$3-billion.
Sony Corp warned of a sharper-than-expected drop in its annual profit and scrapped some longer-term targets, in a sign a slowdown in its gaming business as its PlayStation 4 console nears the end of its life was beginning to hurt. The bleak outlook comes after two years of record profits and underlines concerns a turnaround is losing steam at Sony - which bet on entertainment and gaming for steady revenues after battling years of losses with consumer electronics, such as TV sets, that are more susceptible to price competition.
Mattel Inc beat Wall Street estimates for quarterly revenue, as a more diverse range of Barbie dolls and new toys based on franchises such as the “Jurassic World” powered sales in the United States. The company posted a smaller-than-expected 2.7-per-cent decline in total sales to US$689.2-million, buoyed by a surprise rise in sales in North America. Analysts had expected a near 13 per cent drop, according to IBES data from Refinitiv. Excluding certain items, the company recorded a loss of 44 US cents per share, smaller than the 56 US cents analysts had expected. Mattel shares gained 7 per cent shortly after the opening bell.
More reading:
Friday’s small-cap stocks to watch
Economic news
The U.S. Commerce Department said first-quarter GDP grew at an annual rate of 3.2 per cent, far exceeding market expectations. Contributions from trade and inventories fuelled the quarterly growth. An increase in government investment also helped offset slowdowns in consumer and business spending, according to Friday’s report.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for April. Consensus is 97.0, down from 98.4 in March.
Also: Canadian budget balance for February
With Reuters and The Canadian Press
Terry Weber