U.S. and Canadian stocks opened slightly in the green on Tuesday, as an upbeat corporate earnings season and a pickup in global deals activity lifted demand for risky equities, although gains were capped by concerns around a surge in the Delta variant of the coronavirus.
The TSX was closed Monday for a holiday, but U.S. markets didn’t exhibit much fresh direction for the day, with the Dow ending about 100 points lower following a 250-point climb earlier in the day. The S&P/TSX Composite is only about 24 points away from its record closing high of last week, and for now, there doesn’t seem to be much in its way of it advancing to further peaks given a robust earnings season continues to play out.
This week, 70 companies in Canada have confirmed that they will be releasing their quarterly financial results.
Stronger-than-expected profit reports have ratcheted up already high forecasts of second-quarter results for Corporate America, with earnings now estimated to have climbed about 90% versus forecasts of 65.4% at the start of July, according to IBES data from Refinitiv.
Still, Wall Street’s main indexes have slipped from record highs as investors booked profit amid lofty stock valuations and as concerns over slowing economic growth and rising cases of the Delta variant hit sentiment.
A deepening regulatory crackdown in China has also sent jitters across the global technology sector. China’s Tencent Holdings Ltd slumped as much as 10% in Asia after a Chinese state media outlet branded online games as “spiritual opium”.
Shares of U.S.-listed gaming companies including Activision Blizzard Inc, Take-Two Interactive Software Inc and Electronic Arts Inc inched lower this morning.
In corporate news in Canada this morning, H&R REIT said it is selling its Bow office tower in Calgary as well as its Bell office campus in Mississauga for a combined $1.47-billion. Shares in the REIT were up about 1% in early trading.
Bond yields steadied after weaker-than-expected manufacturing data in the previous session sent them to their lowest since July 20.
Focus on Tuesday will be on factory orders for June, while later in the week, traders will turn to data on the U.S. services sector and the monthly jobs report for July.
Oil was volatile on Tuesday, swinging between positive and negative territory as concern over rising cases of the Delta coronavirus variant weighed on prices, but expectation of a decline in U.S. inventories lent some support.
Brent, the international benchmark for oil prices, was down $1.04, or 1.4%, at $71.85 a barrel by 1236 GMT.
U.S. West Texas Intermediate (WTI) crude was down $1.21, or 1.7%, at $70.05 a barrel.
Both contracts had risen more than 60 cents earlier in the session.
“The oil market continues to alternate between concerns about tight supply on the one hand and about looming demand outages on the other,” said analysts at Commerzbank.
Despite recent fluctuations, oil prices remain relatively high, lifting earnings of major oil firms.
BP, Conocophillips, Diamondback Energy Inc and Continental Resources Inc all reported strong second-quarter earnings this week.
Gold prices eased in a tight range on Tuesday as investors squared positions before U.S. jobs data later this week that could shed more light on labor market health and potentially influence the Federal Reserve’s tapering timeline.
U.S. gold futures were last down 0.5% to $1,812.70.
Currencies and bonds
The U.S. dollar is generally softer against its major currency peers this morning, but there isn’t much fresh direction in currency markets and the Canadian dollar is only modestly firmer.
The 10-year U.S. Treasury yield is slightly firmer this morning, at 1.189%, though that is still near its lowest levels since February.
Other corporate news
Conocophillips on Tuesday posted a second-quarter profit that nearly doubled from the first and topped analysts estimates, helped by higher oil and gas prices and production. Shares are up 1% in the premarket.
PepsiCo Inc unveiled a $3.3 billion sale of its Tropicana and other juice brands in North America to French private equity firm PAI Partners on Tuesday, as it looks to simplify its product range and move away from high-sugar drinks.
Translate Bio surged 29.5% after France’s Sanofi agreed to buy the U.S. biotech company in a $3.2 billion deal.
Under Armour Inc jumped 4.5% after raising its annual revenue forecast
Drugmaker Eli Lilly and Co slipped 1.6% as it reported a 2% drop in quarterly profit.
Shares of Dupont rose 2.5% in premarket trading after the industrial materials maker raised its full-year forecast for a second time.
Other eearnings today include: Activision Blizzard Inc.; Alibaba ADR; Amgen Inc.; Bausch Health Companies Inc.; Canaccord Genuity Group Inc.; Cargojet Inc.; Dream Industrial REIT; Finning International Inc.; Genworth MI Canada Inc.; Gibson Energy Inc.; Great-West Lifeco Inc.; Innergex Renewable Energy Inc.; International Petroleum Corp.; Neighbourly Pharmacy Inc.; NuVista Energy Ltd.; Prudential Financial Inc.; Sleep Country Canada Holdings Inc.; Stella-Jones Inc.
Canadian factory activity in July grew at the slowest pace in five months as supply chain pressures brought on by the coronavirus pandemic weighed, according to data released on Tuesday, but the rate of expansion remained firm. The IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 56.2 in July from 56.5 in June. It was the lowest reading since February but still well above the 50 threshold which shows growth in the sector.
U.S. factory orders rose 1.5% in June after a 2.3% increase in the previous month. Economists polled by Reuters had expected a rise of 1% in June.
Also: U.S. and Canadian auto sales for July.
With files from Reuters