Major U.S. and Canadian stocks opened with modest gains Wednesday, helped along by a much-better-than-expected earnings report from economic bellwether Fedex after Tuesday’s close. But where markets end up at the end of today will be highly dependent on the what the U.S. Federal Reserve has planned.
The Federal Open Market Committee will release its policy statement and economic projections at 2 p.m. ET today, followed by Fed Chair Jerome Powell’s virtual news briefing half an hour later. No change in interest rates is expected.
This will be the first Fed meeting under a newly adopted framework that promises to shoot for inflation above 2% to make up for periods where it is running below that target.
The economic projections will extend out to 2023 for the first time.
“Markets will want to see if the Fed will modify its language as some expect, perhaps something to the effect that it will keep rates low for a period of time (say three years) or maybe do the same thing with its inflation language,” ED&F Man Capital Markets analyst Edward Meir said in a note. “But, we doubt the Fed will lock itself into such a fixed language ahead of a potential turn in the U.S. economy.”
Delivery firm FedEx Corp jumped 7% in early trading after reporting a bigger-than-expected quarterly profit, helped in part by price hikes and lower fuel costs. The positive sentiment may be spilling over to Canada’s Cargojet, up 4% in morning trade.
Canada released inflation numbers this morning for August, which were essentially flat from a month ago and a year earlier - more subdued than Street expectations. U.S. retail sales were also released for August, showing an easing up of consumer spending for the month.
The big corporate news of the day in Canada is Bombardier signing a definitive agreement for the sale of its transportation business. The deal involves a price reduction from what was originally envisioned. Net proceeds to Bombardier is expected to be about $4-billion when the deal closes early next year.
Shares in Bombardier were up 7% following the news.
In early trading, the Toronto Stock Exchange’s S&P/TSX composite index was up 39.69 points, or 0.24%, at 16,470.96.
The Dow Jones Industrial Average rose 36.09 points, or 0.13%, at the open to 28,031.69.
The S&P 500 opened higher by 10.03 points, or 0.29%, at 3,411.23. The Nasdaq Composite gained 31.76 points, or 0.28%, to 11,222.08 at the opening bell.
Overseas, Germany’s DAX was flat at 13,221 while the CAC 40 in France was also unchanged, at 5,067. The FTSE 100 in Britain edged 0.2% lower to 6,094.
Japan reported that its trade balance swung into surplus in August as a 15% decline in exports from a year earlier was outpaced by a 21% drop in imports. Exports have been hammered by the coronavirus pandemic but the rate of decline has been narrowing over the past several months as shutdowns eased and the Chinese economy began to recover from a sharp downturn in early spring.
Tokyo’s Nikkei 225 edged 0.1% higher to 23,475.53 while the Hang Seng in Hong Kong was almost unchanged at 24,725.63. South Korea’s Kospi gave up 0.3% to 2,435.92 and the S&P/ASX 200 in Sydney jumped 1% to 5,956.10. The Shanghai Composite index slipped 0.4% to 3,283.92.
India’s Sensex edged 0.4% higher to 39,182.12 even as the number of the country’s confirmed coronavirus cases jumped to nearly 5 million, second only to the U.S. case count of 6.6 million, according to a tally by Johns Hopkins University. The actual number of cases is thought to be much higher.
Oil rose for a second day on Wednesday, gaining more than 2%, as a hurricane closed U.S. offshore production and an industry report showed U.S. crude inventories unexpectedly decreased.
More than a quarter of U.S. offshore output was shut on Tuesday due to Hurricane Sally. The American Petroleum Institute on Tuesday said crude inventories fell 9.5 million barrels, rather than increased as analysts expected.
Gold prices are higher, helped by a subdued dollar as investors bet on dovish monetary cues from the U.S Federal Reserve when it announces its policy decision later today.
Currencies and bonds
The Canadian dollar is a little firmer this morning and continuing to trade in the narrow range it’s held to over the last week. It held steady as this morning’s Canadian inflation and U.S. retail sales figures were released.
The removal of U.S. tariffs on Canadian aluminum imports had no impact on the currency Tuesday. But Scotiabank notes it “at the margin eliminates the tail risk of heightened trade tensions between the US and Canada.”
“Note that the PM’s throne speech where he will lay out his recovery plan is a week away; markets will look for signs that the government has plans to eventually bring public finances under control. The recent increase in COVID-19 cases in Ontario is worth monitoring for the re-imposition of virus restrictions,” Scotiabank forex analysts said commented.
Other corporate news
Southwest Airlines Co said on Wednesday it now expects cash burn to slow to $17 million per day in the third quarter, adding that bookings had picked up in August and so far in September after struggling in July. The U.S. airline had previously estimated daily cash burn of $20 million.
FedEx Corp reported a bigger-than-expected quarterly profit on Tuesday, after price hikes, lower fuel costs and efficiency gains countered negative impacts associated with a pandemic-fueled surge in e-commerce shipments. Shares are up around 10% in the premarket. Average daily package volume for FedEx Ground, which handles e-commerce deliveries for retailers like Walmart, jumped 31% to 11.6 million during the fiscal first quarter ended Aug. 31. Revenue per package rose 2% to $9.33 during the quarter, which also included one additional business day.
Cominar Real Estate Investment Trust jumped 4.5 per cent after it announced its board has initiated a formal strategic review process “to identify, review and evaluate a broad range of potential strategic alternatives available to it with a view to continuing to enhance unitholder value.”
Eastman Kodak Co. was up almost 75 per cent after a law firm hired by the company’s board said Tuesday that securities transactions made by Chief Executive Officer Jim Continenza around the time the photography equipment maker learned it could receive a US$765-million government loan did not violate internal policies.
Statistics Canada says the consumer price index in August was up 0.1 per cent compared with a year ago. The annual inflation rate was unchanged from the year-over-year increase of 0.1 per cent in July. The average economist estimate had been for a year-over-year increase of 0.4 per cent for August, according to financial markets data firm Refinitiv.
U.S. consumer spending appeared to slow in August as extended unemployment benefits were cut for millions of Americans, offering more evidence that the economic recovery from the COVID-19 recession was faltering. Core retail sales, which correspond most closely with the consumer spending component of gross domestic product, fell 0.1% last month after a downwardly revised 0.9% increase in July, the Commerce Department said on Wednesday. This category, which excludes automobiles, gasoline, building materials and food services, was previously reported to have advanced 1.4% in July. Economists polled by Reuters had forecast core retail sales rising 0.5% in August.
(10 a.m. ET) U.S. NAHB Housing Market Index for September. The Street expects a reading of 78, unchanged from August.
(10 a.m. ET) U.S. business inventories for July. Consensus is an increase of 0.2 per cent from June.
With files from Reuters