Canada’s main stock index rose on Monday, led by gains in the energy and materials sectors as commodity prices rose, while investors awaited a policy announcement from the Bank of Canada later in the week.
In the opening minutes of trading, the Toronto Stock Exchange’s S&P/TSX composite index was up 49.81 points, or 0.23%, at 21,265.96.
U.S. stock indexes opened higher as well, as investors geared up for earnings reports from heavyweight technology companies this week, while PayPal jumped after saying it was not interested in buying Pinterest.
The Dow Jones Industrial Average rose 15.60 points, or 0.04%, at the open to 35,692.62. The S&P 500 opened higher by 8.79 points, or 0.19%, at 4,553.69, while the Nasdaq Composite gained 52.72 points, or 0.35%, to 15,142.92 at the opening bell.
Oil prices are up about 1%, lending further support to the TSX, which will be challenging the record books again today. The Canadian benchmark index closed higher for the 13th straight session on Friday - the longest winning streak since 1985. With higher bond yields buoying the financials sector, and commodities on a major bull run, the TSX has been outperforming even the tech-heavy market to the south this year.
European stocks are also edging higher with energy, healthcare and financials leading gains. Asian markets closed mixed.
Facebook Inc will kick off quarterly results for mega-cap growth names after markets close on Monday, with investors fearing the social media giant’s ad revenue could face the brunt of Apple’s iPhone privacy changes, that hit Snap Inc’s third-quarter revenue.
Microsoft, Apple, Alphabet and Amazon.com Inc are all set to report their results later this week.
The companies shares, which collectively account for over 22% of the weighting in the S&P 500, were mixed in trading before the bell.
“After Snap got an Apple caught in its throat, markets will have an itchy trigger finger over the sell button if the social network says the same,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.
“Additionally, this week, it is a FAANG-sters paradise ... that decides whether the U.S. earnings season party continues, before the FOMC (Federal Open Market Committee) reasserts its dominance next week.”
Some strong earnings reports helped lift the S&P 500 and the Dow to record highs last week, with the benchmark index rising 5.5% so far in October to recoup all of the losses suffered last month.
However, market participants are looking beyond the impressive earnings numbers with a focus on how companies mitigate supply chain bottlenecks, labor shortages and inflationary pressures to sustain growth.
Analysts expect S&P 500 earnings to grow 34.8% year-on-year for the third quarter, according to data from Refinitiv.
Risky assets have staged a comeback in recent weeks after a torrid September as investors shunned bonds. Allocations to bond markets dropped to the lowest level on record in October, BofA Securities’ monthly fund manager survey showed.
The shift in allocations show equity investors are broadly unfazed in the face of broadly slowing economic momentum and market-implied inflation risks on both sides of the Atlantic racing to multi-year highs.
“This resilience might reflect the cheerful earnings season so far but rising yields, consumers getting squeezed by higher energy bills, and no imminent relief for paralyzed supply chains seems like a recipe for greater volatility from record heights,” said Marios Hadjikyriacos, a senior investment analyst at brokerage IM.
The S&P 500 is just below its record peak and the number of companies that have beaten expectations in the third quarter is now close to 84%, while STOXX 600 beats in Europe are past 60% so far, per Refinitiv I/B/E/S data.
On the U.S. economic data front, readings on U.S. third-quarter GDP - the Federal Reserve’s favored inflation gauge, the core PCE price index and consumer confidence data will be released later this week.
The tech sector is already a busy one in the U.S. this morning. PayPal Inc jumped 7.1% after the payments company said it is not buying the digital pinboard site Pinterest Inc for as much as $45 billion at this time. Shares of Pinterest plunged 12.5%.
In Canadian corporate news this morning, Quebec’s Canderel has teamed up with activist real estate investors to take Cominar REIT private for $2.2-billion, in a deal that will expand its portfolio of office towers and retail space in Quebec City, Montreal and Ottawa. The group has proposed to pay $11.75 for every outstanding Cominar unit. That represents a 13-per-cent premium to Cominar’s closing price on Friday, though it is well below Cominar’s stronger days when it was trading above $20 apiece a decade ago. Shares in Cominar are up 12% in early trading.
Meanwhile, the power struggle continues at Rogers Communications. Edward Rogers was reappointed chair of Rogers at a Sunday board meeting that was called invalid by three rival family members as well as the five company directors who Mr. Rogers says he has now replaced. Mr. Rogers is at odds with his mother and two sisters over which independent directors sit on the company’s board. Amid all the uncertainties, RBC today has downgraded its rating on the stock and cut its price target. Shares in Rogers are down 5% in early trading.
Equities
Commodities
Oil prices extended pre-weekend gains on Monday to hit multi-year highs, lifted by tight global supply and strengthening fuel demand in the United States and beyond as economies recover from pandemic-induced slumps.
U.S. West Texas Intermediate (WTI) crude futures hit their highest since October 2014 at $84.76 earlier on Monday.
“It seems that continuous global stock drawdowns are still widely anticipated in coming months and only a dent in demand growth could change the underlying sentiment,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Goldman Sachs said a strong rebound in global oil demand could push Brent crude prices above its year-end forecast of $90 a barrel. The bank estimated gas-to-oil switching could contribute at least 1 million barrels per day (bpd) to oil demand.
After more than a year of depressed fuel demand, gasoline and distillate consumption is back in line with five-year averages in the United States, the world’s largest fuel consumer.
Money managers raised their net long U.S. crude futures and options positions in the week to Oct. 19, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday, underlining strong market sentiment.
Currencies and bonds
The Canadian dollar is up just a tad against the greenback this morning as traders await the latest Bank of Canada decision and commentary on monetary policy later this week.
It’s expected that the central bank will taper asset purchases further. Much attention will be on its forward guidance and any hints of interest rate hikes that may begin next year. In the last few weeks, bond markets and analysts have been raising forecasts for the number of rate hikes over the next couple of years. Scotiabank, for instance, expects four hikes next year and another four in 2023.
“The CAD is one currency that we expect to be able to hold its own against a strong or stronger USD because BoC policymakers are likely to continue adjusting accommodation in light of overshooting inflation and the domestic labour market recovery ahead of what we expect to be a relatively aggressive round of monetary tightening starting in H2 next year,” Scotiabank forex strategists said in a note today. “Should the BoC push back on market pricing for an April start to the tightening cycle, the CAD will soften in the short run. Given that BoC is still very likely to start its tightening cycle well ahead of its major peers, including the Fed, we favour taking advantages of mild CAD losses as a buying opportunity.”
Other corporate news
Burger King and Tim Hortons are struggling with a staffing crunch and the Delta variant keeping coffee-loving office workers at home, causing parent Restaurant Brands International Inc, to miss estimates for quarterly revenue on Monday. Excluding items, it earned 76 cents per share, beating estimates of 74 cents.
Tesla Inc rose 2.6% in premarket trading after the electric-car maker raised prices of its Model X, Model S variants by $5,000, while Morgan Stanley boosted its price target on the stock to $1,200 from $900.
Carnival Corp slipped 1.2% after Citigroup downgraded the cruise operator’s stock to “neutral” from “buy.”
Other earnings today include: Celestica Inc.; Facebook Inc.; Kimberly-Clark Corp.; PrairieSky Royalty Ltd.; T-Mobile US Inc.
Economic news
Canadian wholesale trade most likely rose 1.1% in September from August, led by higher sales in the miscellaneous and the machinery, equipment and supplies subsectors, Statistics Canada said in a flash estimate on Monday. The estimate was calculated based on a weighted response rate of 60.4%. The final response rate for the survey over the past 12 months has been 86.4%.
(10:30 a.m. ET) U.S. Dallas Fed Manufacturing Activity for October.
With files from Reuters
Darcy Keith