Canada’s main stock index started Thursday’s session higher helped by higher crude prices and improved risk sentiment on broader markets. On Wall Street, key indexes also opened up with the Nasdaq jumping more than 1 per cent in the wake of positive results from Tesla.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 67.36 points, or 0.33%, at 20,666.96.
In the U.S., the Dow Jones Industrial Average rose 27.82 points, or 0.08%, at the open to 33,771.66.
The S&P 500 opened higher by 19.86 points, or 0.49%, at 4,036.08, while the Nasdaq Composite gained 145.05 points, or 1.28%, to 11,458.41 at the opening bell.
“The last few weeks may turn out to perfectly encapsulate how the year will be as a whole, fluctuating significantly and suddenly between optimism and pessimism as the data and headlines dictate,” OANDA senior analyst Craig Erlam said.
“We appear to have entered the latter phase now after starting the year in a very buoyant mood, with earnings painting a more realistic picture of the outlook for this year than investors appeared to be convincing themselves was the case.”
Heading into Thursday’s session, 95 of the companies in the S&P 500 having reported. Of those, 67 per cent have beat consensus estimates, well below the 76-per-cent average beat rate over the past four quarters, according to Refintiv.
On Thursday, Wall Street got results from U.S. airlines including Southwest and American Airlines. Southwest reported a fourth-quarter loss and warned it would also post a loss in the current quarter in the wake of travel chaos over the holiday season that saw scores of flights cancelled. American Airlines, meanwhile, forecast sharply higher profit for the full year and topped estimates for quarterly earnings on strong demand for air travel.
After the close, Intel reports.
Tesla shares were up more than 8 per cent in early trading on the Nasdaq after the electric car maker posted fourth-quarter revenue and profit ahead of analysts’ forecasts, despite a decline in vehicle profit margins. The company said revenue was US$24.32-billion for the three months ended Dec. 31, compared with analysts’ average estimate of US$24.16-billion, according to IBES data from Refinitiv.
On the economic side, the Bank of Canada became the first major central bank to signal a pause in its campaign of rate hikes after increasing borrowing costs by a quarter percentage point on Wednesday morning. The Federal Reserve makes its next policy decision next week and markets are also looking for a quarter percentage point increase.
“Following the BoC rate decision and MPR [Monetary Policy Report] yesterday, our economists are sticking with their view this was the last hike in the cycle and they have rates on hold for the remainder of 2023,” RBC chief currency analyst Adam Cole said.
U.S. investors got a better-than-forecast reading on economic growth in the fourth quarter. The advance reading showed growth in the final three months of the year came in at an annual rate of 2.9 per cent. Economists had been expecting a number closer to 2.6 per cent.
In Canada, Canada Mortgage and Housing Corp. is slated to release its report on the state of the country’s rental market. Elsewhere, Statistics Canada released an early estimate on wholesale trade in December. The agency said it expects trade to have fallen 1.8 per cent in the final month of the year.
Overseas, the pan-European STOXX 600 was up 0.45 per cent. Britain’s FTSE 100 edged up 0.18 per cent. Germany’s DAX and France’s CAC 40 rose 0.15 per cent and 0.65 per cent, respectively.
In Asia, Japan’s Nikkei finished down 0.12 per cent.
Crude prices were up in early trading with markets now awaiting next week’s OPEC+ meeting.
The day range on Brent was US$85.74 to US$86.73 in the early premarket period. The range on West Texas Intermediate was US$79.92 to US$80.84.
OPEC and its allies are scheduled to meet on Feb. 1 and early reports suggest the group is likely to stick with current production targets.
Meanwhile, prices showed little reaction to U.S. crude inventory figures which showed stocks rose by 533,000 barrels to 448.5 million barrels last week, according to the U.S. Energy Information Administration. Analysts had been forecasting a bigger 1-million-barrel increase.
“Oil prices nudged up a bit but, for the most part, remain unresponsive to EIA reporting a smaller crude to consensus build,” Stephen Innes, managing partner with SPI Asset Management, said in an early note.
“In Asia, traders are utterly unfazed by an uptick in holiday travel and box office data in China, suggesting that activity is further normalizing in China.”
In other commodities, gold prices were down as traders await further data, looking for hints about the Fed’s likely course on interest rates in the months ahead.
Spot gold fell 0.5 per cent to US$1,936.97 per ounce by early Thursday morning, after earlier hitting its highest since April 2022 at US$1,949.09. U.S. gold futures shed 0.3 per cent to US$1,937.20.
The Canadian dollar was little changed in the wake of the Bank of Canada’s latest policy decision while its U.S. counterpart held near eight-month lows against a group of world currencies.
The day range on the loonie was 74.57 US cents to 74.79 US cents ahead of the North American open.
On Wednesday, the Bank of Canada raised interest rates for the eight time in a row but also signalled plans to put a pause on further hikes.
“The BoC decision spurred the expectation that the Federal Reserve (Fed) could do the same: hike by 25 basis points next week then pause,” Swissquote senior analyst Ipek Ozkardeskaya said.
“This is certainly why the [U.S.] dollar index remained under pressure yesterday.”
Early Thursday, the U.S. dollar index U.S. dollar, which measures the greenback against a basket of currencies, fell as low as 101.5, its lowest since the end of May, according to figures from Reuters.
The euro, meanwhile, rose to a new nine-month high of US$1.09295 and was last just below that level, little changed on the day. Britain’s pound was up 0.15 per cent to US$1.2419, mounting a new bid on territory above US$1.245 having failed to get there last week, Reuters reported.
In bonds, the yield on the U.S. 10-year note was up slightly at 3.474 per cent in the predawn period.
More company news
Imperial Oil Ltd said on Thursday that it would invest $720-million to construct a renewable diesel facility near Edmonton.
Canfor Corp. says it is “restructuring” its operations in British Columbia, permanently closing one sawmill and shuttering another for an extended period amid plans to build a new wood manufacturing facility. A statement Wednesday from the Vancouver-based company says the sawmill and pellet plant in Chetwynd, B.C., north of Prince George, is expected to close early in the second quarter of 2023. Meanwhile, it says the sawmill in Houston, B.C., west of Prince George, will close temporarily for an unspecified period as Canfor plans to build a “new, modern, globally competitive manufacturing facility” to produce “high-value products.” -The Canadian Press
The Globe’s Clare O’Hara reports Manulife Financial Corp. is joining forces with U.S.-owned medical advisory firm Cleveland Clinic Canada in a major step toward expanding the insurer’s role to becoming a provider of preventative health care services for Canadians. Canada’s largest life insurer will announce on Thursday it has appointed Toronto-based Cleveland as the new medical director for its group benefits operations. The clinic will provide Manulife access to Cleveland’s global network of medical experts as well as conduct joint research into preventative health care.
Mastercard Inc on Thursday reported a better-than-expected profit for the fourth quarter as resilient spending volumes helped the payments company cushion the blow from higher expenses. Mastercard, which has a bigger exposure to Asia Pacific than peer Visa Inc, benefited from the reopening of borders and pent-up demand for travel in the region, helping it offset the hit from 10% higher costs in the quarter. -Reuters
Southwest Airlines Co on Thursday warned of a loss in the current quarter, as passengers shunned the carrier in the immediate aftermath of a tech meltdown that forced it to scrap thousands of flights between Christmas and New Year’s Eve. The forecast heaps more pain on the largest U.S. domestic carrier, which is facing regulatory scrutiny over its flight scheduling and handling of over 16,700 cancellations that disrupted holiday plans for tens of thousands of passengers. Southwest, which also reported a loss in the fourth quarter, said it expects a revenue hit of between US$300-million and US$350-million in the first quarter. -Reuters
IBM Corp said it would lay off 3,900 people as part of some asset divestments and posted flat fourth-quarter revenue due to lackluster demand for its consulting services. Big Blue spun-off its large and laggard managed infrastructure business, now called Kyndryl, in late 2021 to focus on its hybrid-cloud, where it helps clients set up a combination of their own data centers and leased computing resources. It also divested its healthcare data and analytics business from its AI business Watson Health. The resulting layoffs will cause a US$300-million charge in the January-March period, IBM said. -Reuters
Chevron Corp said it would triple its budget for share buybacks to US$75-billion, the oil industry’s most ambitious shareholder payouts to date, as high oil and gas prices pad profits. The oil industry has been facing calls from investors and the White House to put last year’s record earnings from sky high energy prices into more drilling, acquisitions, or to reduce prices for consumers. -Reuters
(8:30 a.m. ET) Canadian wholesale trade for December.
(8:30 a.m. ET) U.S. GDP for Q4.
(8:30 a.m. ET) U.S. durable goods and core orders for December.
(8:30 a.m. ET) U.S. goods trade deficit for December.
(8:30 a.m. ET) U.S. wholesale and retail inventories for December.
(8:30 a.m. ET) U.S. initial jobless claims for week of Jan. 21.
(10 a.m. ET) U.S. new home sales for December.
With Reuters and The Canadian Press