Major North American stock indexes opened higher on Tuesday, with the Nasdaq up more than 1%, as Moscow’s withdrawal of some troops near Ukraine assuaged fears of a potential Russian invasion slightly.
The Dow Jones Industrial Average rose 120.02 points, or 0.35%, at the open to 34,686.19. The S&P 500 opened higher by 27.61 points, or 0.63%, at 4,429.28, while the Nasdaq Composite gained 206.26 points, or 1.50%, to 13,997.18 at the opening bell.
Canada’s main stock index opened higher as well, although weakness in commodity-linked shares limited gains. At 9:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 36.43 points, or 0.17%, at 21,388.94.
Russia said some of its military units were returning to their bases after exercises near Ukraine, following days of U.S. and British warnings that Moscow might invade its neighbor at any time. However, it was not immediately clear if it was a temporary signal of any kind of significant pullback.
The latest Russia-Ukraine development drew a cautious response from Ukraine and Britain, after days of U.S. and British warnings that Moscow might invade its neighbor at any time.
British Prime Minister Boris Johnson and U.S. President Joe Biden had agreed in a call on Monday there was a crucial window for diplomacy.
The CBOE Market Volatility index, a gauge for investor anxiety, fell back after shooting up to its highest level in nearly three weeks in the previous session.
“War or no war, it makes market very volatile. And that’s unfortunately what we have to deal with,” said Andrea Cicione, head of strategy at TS Lombard in London.
“Until markets feel comfortable enough that this is not going to happen, we’re going to get this kind of volatility quite regularly.”
Data out this morning showed that wholesale inflation in the United States surged again last month, rising 9.7% from a year earlier - a tad higher than Street expectations of 9%. From December, the producer price index was up 1%. Excluding volatile food and energy prices, wholesale inflation rose 0.8% from December and 8.3% from January 2021. Stock and bond markets held steady upon the report’s release.
In corporate news this morning, TC Energy Corp. raised its dividend to 90 cents a share, from 87 cents, as it reported a fourth-quarter profit of $1.1 billion. TC Energy says its comparable earnings for fourth quarter 2021 amounted to $1.06 per share compared with $1.15 per share in 2020. Analysts on average had expected an adjusted profit of $1.07 per share, according to Refinitiv. Shares are up 0.8% in early trading.
Restaurant Brands International Inc., meanwhile, beat estimates for quarterly revenue and profit, led by soaring online sales and a recovery in demand at its Burger King and Tim Hortons chains. Restaurant Brands’ total revenue rose about 14% to $1.55 billion in the fourth quarter ended Dec. 31, beating estimates of $1.52 billion, according to IBES data from Refinitiv. Excluding items, the Toronto, Ontario-based company earned 74 cents per share, topping estimates of 69 cents. Shares are up more than 4%.
U.S.-listed shares of Suncor Energy were down about 3%, under pressure both from lower crude oil prices and a downgrade by RBC. The bank lowered its rating to “sector perform” from “outperform”, commenting that it sees better upside from some other energy names, but it raised its price target to C$42 from C$37.
The major U.S. indexes have had a rocky start to 2022, with the tech-heavy Nasdaq down over 11.8% so far this year as geopolitical tensions rattled investors’ sentiment already hit by worries over aggressive interest rate hikes by the Fed to combat surging inflation. But the TSX Composite Index has escaped much of the downward pull, thanks to its heavy weighting in energy stocks as well as financials, which tend to benefit from higher interest rates. The TSX is up 0.6% year to date.
Markets are pricing a 60.5% chance of a 50 basis point hike and a 39.5% chance of a 0.25% hike at the central bank’s March meeting. Minutes from the Fed’s January policy meeting are due on Wednesday.
Equities
Commodities
Oil dropped more than 3% from a seven-year high after Russia said some of its military units were returning to their bases after exercises near Ukraine, easing some worries about a disruption to Russian energy supplies. But it was not clear how many units were being withdrawn, and by what distance, after a build-up of an estimated 130,000 Russian troops.
Both WTI and Brent hit their highest since September 2014 on Monday, with Brent touching $96.78 and WTI reaching $95.82. The price of Brent rose 50% in 2021 as a global recovery in demand from the COVID-19 pandemic strained supply.
Investors are also watching talks between the United States and Iran on reviving Tehran’s nuclear deal with world powers, which could potentially allow for higher Iranian oil exports.
Russian Foreign Minister Sergei Lavrov spoke to his Iranian counterpart Hossein Amirabdollahian on Monday, and they noted a “tangible move forward” in reviving the Iran nuclear deal, Russia’s foreign ministry said.
In other developments, the latest weekly reports on U.S. inventories are expected to show a drop in crude stocks, underlining a tight supply and demand balance.
Meanwhile, gold is down about 1% this morning, as traders shifted money into more riskier assets amid the latest Russia-Ukraine developments.
Currencies and bonds
The Canadian dollar is slightly firmer this morning, undermined by the slide in crude oil prices but benefiting from this morning’s greater risk appetite across global markets.
“The CAD is struggling to break out from the shadow of swings in the broader risk mood at the moment, condemning trading to a choppy trading range around the 1.27 point,” or 78.74 cents (U.S.), Scotiabank forex strategists said in a note today.
“We think there are some solid backstops for the CAD which include generally firm commodity prices (and the positive terms of trade effect this confers on the CAD) as well as market pricing for the Bank of Canada to keep pace (or even lead slightly in terms of timing) with a Fed move to lift its benchmark rate up by 100 basis points by mid-year. But it will be the positive market mood this morning that gives the CAD an opportunity to pick up a little support,” Scotiabank said.
The U.S. dollar index was down 0.2% on the day at 96.072, pulling back from the two-week high it hit on Monday.
The U.S. 10-year Treasury yield broke back above 2%, while Germany’s 10-year yield touched its highest since 2018 after signs of an easing of Russia-Ukraine tensions. Canada’s 10-year government bond is at 1.95% this morning, just a touch below the highs of last week.
Other corporate news
Arista Networks jumped 9.3% after the cloud infrastructure supplier forecast current-quarter revenue above estimates after handily topping fourth-quarter profit.
A $5.4 billion deal to buy Israeli chipmaker Tower Semiconductor sent shares of Intel Corp up by 1.7%. The deal gives Intel access to more specialised production, better positioning it to take advantage of demand for semiconductors.
Shares of other chipmakers also rose, with Nvidia Corp gaining 3.9% ahead of its results on Wednesday.
Battered travel stocks including those of carriers and cruise operators also rallied.
Other Earnings include: Airbnb Inc.; Capstone Mining Corp.; CT Real Estate Investment Trust; Dream Industrial Real Estate Investment Trust; First Quantum Minerals Ltd.; FirstService Corp; Mainstreet Equity Corp.; Marriott International Inc.; Morguard North American Residential; Nexa Resources SA; Restaurant Brands International Inc.; TC Energy Corp.; West Fraser Timber Co. Ltd.
Also see:
Tuesday’s analyst upgrades and downgrades
Tuesday’s small-cap stocks to watch
Economic news
Canada Mortgage and Housing Corp. says the annual pace of housing starts in January slowed compared with December. The national housing agency says the seasonally adjusted annual rate of housing starts fell to 230,754 units in January compared with 238,405 in the final month of 2021.
Canadian home prices rose 4.9% in January from December to reach a fresh high, as sales inched up 1% on the month, data from the Canadian Real Estate Association showed on Tuesday. The national average selling price hit a new record at C$748,450 in January, up 21% from a year earlier. CREA’s home price index posted a record month-over-month gain of 2.9% and 28% year-over-year, also a record.
Wholesale inflation in the United States surged again last month, rising 9.7% from a year earlier in a sign that price pressures remain high at all levels of the economy. The Street was expecting a 9% rise. The Labor Department said that its producer price index — which measures inflation before it reaches consumers — jumped 1% from December. Excluding volatile food and energy prices, wholesale inflation rose 0.8% from December and 8.3% from January 2021.
With files from Reuters
Darcy Keith