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Equities
Canada’s main stock index fell at the open Wednesday with energy and materials shares hitting sentiment. On Wall Street, major indexes were also down sharply as investors weigh Boeing’s record annual loss and look ahead to results from big tech names later in the day and the afternoon rate announcement from the Federal Reserve.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 148.67 points, or 0.84%, at 17,630.74.
South of the border, the Dow Jones Industrial Average fell 43.3 points, or 0.14%, at the open to 30893.78. The S&P 500 fell 12.8 points, or 0.33%, at the open to 3836.83, while the Nasdaq Composite dropped 139.5 points, or 1.02%, to 13486.576 at the opening bell.
Microsoft Inc. shares opened higher after the company said its Azure cloud computing services grew more than 50 per cent in the second quarter. The software giant’s total revenue rose to US$43.08-billion in the second quarter ended Dec. 31, from US$36.91-billion a year earlier, beating analysts’ estimates of US$40.18-billion, according to IBES data from Refinitiv.
The results, released after Tuesday’s close, set the stage for another round of tech results on Wednesday, with Apple, Facebook and Tesla all reporting after the end of trading.
“Microsoft results didn’t only surprise investors to the upside, but got them to dream for more,” Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank.
“But if the U.S. big tech continues its extended honeymoon, other layers of the economy don’t necessarily tell the same story,” she said. “The pandemic continues taking a toll on businesses in the U.S. and worldwide - keeping most of small and medium sized companies craving for more fiscal and monetary stimulus.”
The day’s other big event will be the Fed’s afternoon policy decision. No move is expected by the powerful U.S. central bank but investors will watch an afternoon news conference by Fed chair Jerome Powell for signals about the economic outlook and signs of a future slowdown in the Fed’s asset-buying program.
“There will certainly be no hint of a policy tightening, or tapering in the foreseeable future, given that the health crisis has not been losing speed with the mutation of the virus and delay in vaccine distributions across the globe,” Ms. Ozkardeskaya said.
Ahead of the start of trading, Boeing Co reported a record annual loss of US$11.94-billion and said it would delay its all-new 777X jet again. Shares were down more than 4 per cent in early trading.
In this country, Canadian National Railway hiked its dividend 7 per cent and reinstated its guidance for 2021 as it saw improved demand for freight in the final months of last year.
Montreal-based CN said its net income rose 17 per cent in the fourth quarter to $1.02-billion, or $1.43 per share, helped largely by shipments of grain. The results were released after Tuesday’s close.
After markets close today, Canadian Pacific Railway will release its latest quarterly earnings. Ahead of that report, CP said Wednesday its board will seek shareholder and regulatory approval for a five-for-one stock split.
Overseas, major European markets were mixed after a lower start. The pan-European STOXX was off 0.08 per cent. Britain’s FTSE 100 fell 0.13 per cent. Germany’s DAX slid 0.32 per cent while France’s CAC 40 rose 0.05 per cent.
In Asia, Japan’s Nikkei closed up 0.31 per cent. Hong Kong’s Hang Seng fell 0.32 per cent.
Commodities
Crude prices pulled back after early gains on new industry figures that showed a surprise drop in U.S. inventories.
The day range on Brent is US$55.94 to US$56.49. The range on West Texas Intermediate is US$52.65 to US$53.12.
The American Petroleum Institute said late Tuesday that weekly U.S. crude stocks fell by 5.3 million barrels. Analysts had been looking for an increase.
More official figures are due later Wednesday morning from the U.S. Energy Information Administration.
“In the bigger picture, oil continues consolidating at the top of the range of its rally from the November lows,” OANDA senior analyst Jeffrey Halley said.
“The Saudi Arabian cuts, OPEC+ compliance above 85 per cent and an insatiable demand from Asia means that oil has seen its cyclical lows for 2021.”
Crude’s advance continues to be capped by concerns about rising coronavirus infections in countries including Britain and the United States and the resurgence of the virus in China.
However, official Chinese data showed 75 new confirmed cases of COVID-19 on Wednesday, the lowest daily rise since Jan. 11, easing concern of a sharp drop in travel over the Lunar New Year when hundreds of millions typically travel, according to a Reuters report.
In other commodities, gold slid Wednesday as market participants awaited the Fed’s policy decision.
Spot gold fell 0.6 per cent to US$1,838.50 per ounce. U.S. gold futures eased 0.7 per cent to US$1,838.00.
“Depending on the FOMC’s dovishness, or not, gold could be either US$1,800 or US$1,900.00 an ounce by tomorrow morning,” Mr. Halley said in a note.
Currencies
The Canadian dollar was down in early going as its U.S. counterpart edged higher on global markets with currencies moving in a tight range ahead of the Fed policy decision.
The day range on the loonie is 78.53 US cents to 78.83 US cents.
There were no major Canadian economic releases on Wednesday’s calendar.
“FX majors have traded extremely tight ranges overnight, with no lead from asset markets and all eyes are on the Fed,” RBC chief currency strategist Adam Cole said.
“Year-to-date, all G10 currencies are within 1 per cent of where they started the year and we see no evidence of the January overshooting that we have observed in each of the last five years, so there is little value in looking for reversals this year.”
On global markets, the U.S. dollar index, which weighs the greenback against a group of world currencies, edged up 0.1 per cent to 90.284 early Wednesday, following a 0.2-per-cent decline during the previous session. The index has been consolidating since hitting a three-year low at the start of the month, according to figures from Reuters.
The British pound climbed to its highest since April 2018 at US$1.3753 before trading slightly lower at US$1.3724. The euro dipped 0.1 per cent to US$1.2146.
The Australian dollar slipped 0.2 percent to 77.30 U.S. cents, paring Tuesday’s 0.5 per cent rally.
More company news
CGI Inc. topped expectations as it reported its first-quarter profit rose to $343.5-million compared with $290.2-million a year earlier, helped by improved margins and lower restructuring and integration costs. Excluding specific items, CGI says it earned $1.33 per diluted share for its most recent quarter, up from $1.23 per diluted share a year earlier. Analysts on average had expected an adjusted profit of $1.24 per share, according to financial data firm Refinitiv.
GameStop shares surged another 100 per cent in early trading, boosted by increased interest among amateur investors who have lifted the share price by 700 per cent over the past two weeks. But some hedge funds have refused to budge from their bearish bets, with FIS’ Analytics data showing investors had piled on US$2.2-billion in bearish bets on the U.S. video game retailer - 20 per cent of its market capitalization, In the meantime, Reddit’s Wallstreetbets stock trading discussion group were backing the company, buying shares and call options on the stock.
Starbucks Corp on Tuesday reported a larger-than-expected fall in quarterly sales as the renewed surge in coronavirus cases in the United States kept customers at home. The world’s largest coffee chain’s global same-store sales fell 5% in its first quarter, which ended Dec. 27, more than analysts’ estimates of a 3.4% decline, according to Refinitiv IBES data.
Boeing’s 737 MAX airliner is safe to return to service in Europe, the European Union Aviation Safety Agency (EASA) said on Wednesday, lifting a 22-month flight ban after two crashes of the jet which caused 346 deaths. “We have every confidence that the aircraft is safe, which is the precondition for giving our approval. But we will continue to monitor 737 MAX operations closely as the aircraft resumes service,” EASA Executive Director Patrick Ky said. “In parallel, and at our insistence, Boeing has also committed to work to enhance the aircraft still further in the medium term, in order to reach an even higher level of safety,” he said.
Economic news
(8:30 a.m. ET) U.S. durable goods orders for December.
(2 p.m. ET) U.S. Fed announcement with Chair Jerome Powell’s press briefing to follow.
With Reuters and The Canadian Press
Terry Weber