Canada’s main stock index gained on Wednesday as investors expect fiscal stimulus measures that will be announced next week to be huge, while a jump in oil prices supported the commodity-heavy index.
In the opening minutes of trade, the Toronto Stock Exchange’s S&P/TSX composite index was up 59.9 points, or 0.31%, at 19,263.6.
U.S. stock indexes opened flat, as Goldman Sachs and JPMorgan kicked off the first-quarter corporate earnings season, against the backdrop of a swift vaccine-led global economic recovery.
The Dow Jones Industrial Average fell 8.32 points, or 0.02%, at the open to 33,668.95. The S&P 500 opened lower by 0.01 points, or -0.00%, at 4,141.58, while the Nasdaq Composite gained 7.98 points, or 0.06%, to 14,004.08 at the opening bell.
Goldman Sachs Group blew past Wall Street expectations for first-quarter profit, as the U.S. investment bank capitalized on record levels of global dealmaking activity. Earnings per share rose to $18.60 from $3.11 a year earlier. Analysts on average had expected a profit of $10.22 per share, according to the IBES estimate from Refinitiv.
JPMorgan Chase also surpassed Street estimates, seeing its first-quarter profit jump nearly five fold from a year earlier, as the improving economy allowed the bank to release roughly $5 billion from its loan-loss reserves that it had stored away in the early weeks of the pandemic. Excluding the loan loss releases, the bank earned $3.31 per share. Analysts were looking for JPMorgan to report a profit of $3.10 per share, according to FactSet.
Goldman was up almost 3% in early trading following the earnings, but JPMorgan was trading mostly in negative territory. Wells Fargo also released better-than-expected quarterly earnings this morning but was also trading in the red.
Analysts expect overall net income for U.S. banks to jump between 60% and 250% from a year earlier, partly as they release a chunk of “reserves” – money they had set aside last year for expected pandemic loan losses.
First-quarter earnings for S&P 500 companies are estimated to have risen 25% in the quarter, according to Refinitiv IBES data. That would be the biggest quarterly gain since 2018, when tax cuts under former President Donald Trump had powered profit growth.
The S&P 500 closed at record highs in the previous session as a jump in high-flying technology stocks helped offset the impact of stronger-than-expected inflation data and a pause in the use of Johnson & Johnson’s COVID-19 vaccine. The TSX ended the day almost unchanged, with even Air Canada closing flat after Ottawa announced an aid package for the airline late Monday. Shopify rose more than 3%.
Technology stocks including Apple, Alphabet, Microsoft, Shopify and Tesla edged higher in early premarket deals.
There are no major Canadian economic reports due out today, but traders will be closely watching for the 2 p.m. (ET) release of the Federal Reserve’s Beige Book, which will cover the period from late February to early April. “We reckon the “expanded modestly” conclusion from the previous regional report card will be upgraded, as pandemic-related restrictions continued to be relaxed, the distribution of vaccines picked up its already faster-than-anticipated pace, and activity rebounded from mid-February’s major, coast-to-coast, winter and ice storm,” commented BMO economist Michael Gregory.
“It will be interesting to see whether more buoyant spending, combined with ongoing supply shortages and other capacity constraints along with higher commodity prices, changes the inflation narrative,” he added.
Crude oil prices jumped on revised oil demand forecasts on Wednesday despite concerns over rising coronavirus cases and vaccine rollouts.
Brent crude futures rose $1, or 1.57%, to $64.67 a barrel by 0858 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 96 cents, or 1.6%, at $61.
“The main price driver this morning is the monthly IEA report that foresees a significant rise in global oil demand in the second half of the year. This, in turn, will increase demand for OPEC oil and deplete worldwide and OECD inventories,” said PVM Oil Associates analyst Tamas Varga.
The International Energy Agency (IEA) predicted global oil demand and supply were set to rebalance in the second half of the year and that producers may then need to pump an additional 2 million barrels per day (bpd) to meet the expected demand.
Similarly, the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday raised its global demand forecast by 70,000 bpd from last month’s forecast and now expects global demand to rise by 5.95 million bpd in 2021.
Signs of a strong economic recovery in China and the United States have underpinned recent price gains, but stalled vaccine rollouts worldwide and soaring COVID-19 cases in India and Brazil have slowed the market’s advance.
Currencies and bonds
The Canadian dollar was drifting lower this morning as the benchmark U.S. Treasury yield was hovering near 1.631%, below last month’s highs above 1.7%.
“The Canadian dollar is holding most of yesterday’s recovery against the U.S. dollar from the low 1.26s (79.36 cents US) but has failed to make any additional progress in overnight trading amid a dearth of new factors for investors to focus on,” a note by Scotiabank said this morning. “We continue to think that near-to-medium term prospects look fairly solid for the Canadian dollar, however, given that positive economic developments indicate a robust recovery (which will be able to withstand bumps in the road, such as Ontario’s renewed lockdown) and strengthening demand for raw materials as the global economic recovery develops.”
Other corporate news
Discovery Inc fell 3.9% as CNBC reported on Tuesday that Credit Suisse Group AG was still unloading its positions in the media company after losses relating to Archegos Capital Management.
American Airlines said on Wednesday it expects to fly more than 90% of its domestic seat capacity in the summer of 2021, compared with the same period in 2019, due to a strong rebound in bookings. The U.S. airline also said it expects to utilize 80% of its international seat capacity this summer, compared with 2019 levels.
Wells Fargo had its best quarter in a year and a half, posting a profit of $4.74 billion and freeing up more than a billion dollars that had been set aside for potential loan defaults at the beginning of the coronavirus pandemic. The San Francisco-based bank on Wednesday said it earned $1.05 per share on revenue of $18.06 billion in the quarter, both surpassing Wall Street’s forecasts. Analysts surveyed by Zacks were expecting earnings per share of 69 cents and revenue of $17.62 billion.
Other earnings today include: Shaw Communications Inc.
U.S. import prices rose 1.2% last month after advancing 1.3% in February. The fifth straight monthly gain lifted the year-on-year increase to 6.9%, the largest rise since January 2012. Import prices rose 3.1% on a year-on-year basis in February.
(12 p.m. ET) U.S. Fed Chair Jerome Powell speaks to the Economic Club of Washington.
(2 p.m. ET) U.S. Beige Book released.
With files from Reuters